96% Chance of a 25 Basis Points Cut Today
The Federal Reserve will hold its last meeting of 2024 today. The Fed is expected to make some important announcements after the meeting. There is a strong possibility of announcing a 25 basis point interest rate cut. Let’s take a look at this scenario.
Fed expected to cut interest rates again
Kalshi said there is at least a 96% chance that the Fed will announce a 25 basis point rate cut today.
The Federal Reserve has cut interest rates at least twice this year. Once the new interest rate cuts are implemented, the total amount of interest rate cuts in 2024 will be as high as 100 basis points.
U.S. inflation gauge rises again
Inflationary pressures have risen sharply over the past few months. That complicates the Fed’s efforts to stabilize the economy.
At the beginning of this year, the US CPI index was as low as 308.417 points. In April, it rose to 313.55 points. It hit an annual peak of 315.66 points in October. However, it dropped slightly to 315.49 points in November.
In January 2024, the U.S. producer price index was 142.683 points. It reached 144.834 points in June. It has continued to grow since June. In November, it hit an annual peak of 146.493 points.
At the beginning of the year, the U.S. personal consumption expenditures price index was about 122.115 points. It hit a peak of 123.234 points in April. It has been rising steadily since June. In September, the index was 123.931 points. In October, it climbed to a monthly peak of 124.266 points.
U.S. labor market challenges
What mainly prompted policymakers to consider the option of cutting interest rates was the deterioration of the U.S. job market. While the job market initially showed some improvement, it has softened recently.
The index of first-time jobless claims in the United States on November 30 was 224,000. In the first week of December, the index rebounded to 242,000 – where it was at least eight weeks ago.
On November 23, the index of people continuing to apply for unemployment benefits in the United States was 187,000. It surged to 189K on November 30th.
What to expect in 2025
It’s important to understand the Fed’s outlook for 2025. The United States will welcome a new government to the White House in late January next year. Data show that the main challenge facing the next government will be to balance inflation control and economic growth.
