The Fed cut the rate by .5% in September. What now?

Do they continue to cut the rates? Do they pause? It could go either way.

The Federal Reserve on Wednesday September 18^th enacted its first interest rate cut since the early days of the Covid pandemic, slicing half a percentage point off benchmark rates in an effort to head off a slowdown in the labor market.

With both the jobs picture and inflation softening, the central bank’s Federal Open Market Committee chose to lower its key overnight borrowing rate by a half percentage point, or 50 basis points, affirming market expectations that had recently shifted from an outlook for a cut half that size.

Outside of the emergency rate cuts during Covid, the last time the FOMC cut by half a point was in 2008 during the global financial crisis.

The Federal Reserve projected to lower interest rates by another half point before the end of 2024, and the central bank has two more policy meetings to do so. The Fed’s two remaining meetings for the year are scheduled on Nov. 6-7 and Dec.17-18.

Futures markets previously had been indicating a more aggressive path and in fact now are pricing in about a 1-in-5 chance that the Fed does NOT cut at its Nov. 6-7 meeting.

But last week’s stronger-than-expected jobs report for September and, on Thursday, a Consumer Price Index report showing inflation running hotter than anticipated has thrown the conventional wisdom into a bit of disarray.

Indeed, one voting member of the Federal Open Market Committee, the Fed’s rate-making body, said Thursday he’d be happy if the Fed skipped a rate cut at its November meeting.