(Reuters) – The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday as policymakers took note of a job market that has “generally eased” while inflation continues to move towards the U.S. central bank’s 2% target.
“Economic activity has continued to expand at a solid pace,” the central bank’s rate-setting Federal Open Market Committee said at the end of a two-day policy meeting in which officials lowered the benchmark overnight interest rate to the 4.50%-4.75% range, as widely expected. The decision was unanimous.
MARKET REACTION:
STOCKS: The S&P 500 held a 0.66% gain after the news
BONDS: The yield on benchmark U.S. 10-year notes rose to 4.353%. The 2-year note yield rose to 4.2347%
FOREX: The dollar index pared a loss to -0.54% with the euro up 0.48%.
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“In an action-packed week, the Fed didn’t add any drama. Cutting by 25 basis points still keeps the federal funds rate restrictive, but not as restrictive as it was. Although the Fed says the risks to its employment and inflation goals are roughly in balance, they probably should have italicized “roughly.” Elections have consequences and we could see a marginal improvement in growth relative to their forecasts, but also a marginal increase in inflation relative to their forecasts. That would call for a more gradual pace of rate reductions. They don’t need to backtrack on rate cuts, but they don’t need to hurry up with them either.”
RYAN DETRICK, CHIEF MARKET STRATEGIST, CARSON GROUP, OMAHA
“The Fed didn’t rock the boat it was widely assumed they would cut by 25 basis points, which they did. It was nice to see a unanimous decision.”
“The big question now is will they cut again in December? Our best guess is they do, as inflation continues to improve.”
“It’s nice that they are recognizing some improvements in the U.S. economy. At the same time there are risks to a potentially slowing labor market, which in our opinion, leaves the door wide open to another cut in December at the next meeting.”
HELEN GIVEN, ASSOCIATE DIRECTOR OF TRADING, MONEX USA, WASHINGTON D.C.
“Overall, a very cautious decision that doesn’t give us much to go on when looking ahead to December. Powell may give more concrete clues in his presser but I’m expecting we’ll hear about “data dependence” a lot.”
(Compiled by the Global Finance & Markets Breaking News team)