The US Federal Reserve is poised to conduct its concluding meeting for the year 2024 today, with expectations of significant announcements on the horizon. Among these, there is a strong possibility of a 25 basis points interest rate reduction. Let’s delve deeper into the current economic scenario and what it implies for the future.
US Fed Expected to Cut Rates Again
Market intelligence platform Kalshi suggests there is a substantial 96% probability that the Federal Reserve will announce a 25 basis points rate cut. This year has already seen the US Fed implementing at least two rate cuts. Should today’s anticipated rate cut be enacted, the cumulative rate reduction for 2024 could reach an impressive 100 basis points.
US Inflation Metrics Back on the Rise
Inflationary pressures have surged considerably over recent months, adding complexity to the Federal Reserve’s efforts to stabilize the economy. At the start of the year, the US Consumer Price Index (CPI) was recorded at 308.417 points. By April, it had climbed to 313.55 points, reaching a yearly peak of 315.66 points in October. However, November saw a slight decline to 315.49 points.
The US Producer Prices index began 2024 at 142.683 points. It ascended to 144.834 points by June and has been on a consistent upward trajectory since, peaking at 146.493 points in November. Similarly, the US Personal Consumption Expenditure Price index started the year around 122.115 points. By April, it peaked at 123.234 points and continued its rise to 124.266 points in October.
US Labour Market Challenges
The condition of the US labor market has been a key factor prompting policymakers to consider a rate cut. Although some initial improvements were observed, recent trends indicate a weakening job market. On November 30, the US Initial Jobless Claims index stood at 224K, rebounding to 242K in early December, reflecting levels seen eight weeks prior.
Furthermore, the US Continuing Jobless Claims index rose from 1.87K Thousand on November 23 to 1.89K Thousand by November 30, underlining the challenges faced by the labor market.
What to Expect for 2025
As we look forward to 2025, understanding the Federal Reserve’s outlook is crucial. The US is set to welcome a new administration in the White House in late January. The primary challenge for the incoming government will be to strike a balance between controlling inflation and fostering economic growth. This delicate equilibrium will be essential in shaping the economic landscape of the future.
In conclusion, today’s Federal Reserve meeting could have a significant impact on the US economy, with potential rate cuts influencing inflation, labor markets, and economic policy heading into 2025. Staying informed on these developments will be key for businesses, investors, and policymakers alike.
