Latest news with #Federal Open Market Committee
Forbes
03-08-2025
- Business
- Forbes
What To Expect On Interest Rates For The Remainder Of 2025
Fixed income markets see two or three interest rate cuts coming from the Federal Open Market Committee over the three remaining scheduled meetings of 2025. Soft jobs growth as reported for July and downward revisions to prior month's reports may call for incrementally lower interest rates. However, there is more economic data to come before the FOMC's next meeting to set interest rates on September 17. The Fed's Remaining Meeting Schedule Having held interest rates steady at 4.25% to 4.5% for the first five meetings of 2025, the FOMC has three scheduled meetings left. Interest rate decisions from these meetings will be announced on September 17, October 29 and December 10. The September and December meetings will also include an update to the FOMC's Summary of Economic Projections, where policymakers provide forecasts for economic variables including interest rates. The Fed Chair, Jerome Powell, will hold a press conference after each meeting. Powell is also scheduled to speak at the Jackson Hole Economic Symposium during August 21-23. Historically these speeches from the Fed Chair have often been significant in signaling perspectives on monetary policy. Slowing Recent Job Growth Part of the FOMC's mandate is full employment, and July's jobs report showed some slowing in job growth. However, perhaps more importantly, job growth for May and June was revised down. That data and the accompanying revisions to prior months may be sufficient to prompt the FOMC to cut interest rates in September. That's because the pace of hiring over the past 3 months is now the slowest since the last recession. Although, despite recently slowing job growth, unemployment has remained in a relatively narrow band of 4% to 4.2% since May 2024. The FOMC will also have August's jobs report, scheduled for release on September 5, when they next meet on September 17 so that will provide further color on employment trends. Inflation Data Updates to the Consumer Price index will come on August 12 and September 11. Despite subdued inflation for much of 2025 so far, the most recent CPI report for the month of June showed some inflationary pressure from tariffs on the prices of goods. However, even if inflation does pick-up, some policymakers have argued that the FOMC should look through what may be a one-time increase in prices. Rolling Back Restrictive Monetary Policy If there is further evidence that the jobs market could be softening and provided inflation figures remain generally tame, then the FOMC may elect to ease monetary policy. That's because monetary policy is currently somewhat restrictive, a position the FOMC put in place to help curtail inflation. Markets currently expect that a September 17 interest rate cut is highly likely, although not certain. Following that, cuts in October and December are possible. This makes it likely that the Federal Funds rate ends the year at under 4% according to the CME FedWatch Tool. However, much of this projection will be subject to upcoming economic data. Recent Dissents A cut in September is also fairly likely because July's meeting saw two dissents calling for lower interest rates. That's relatively unusual. In both cases, these dissents were due to seeing early risks to the jobs market and a willingness to look through any tariff-related inflation as a one-off event. Governor Waller telegraphed his dissent in a recent speech, which proved prescient on revisions to jobs figures. Michelle Bowman explained her dissent in a recent statement. What To Expect Barring unexpected economic data the FOMC appears on course to cut interest rates in September, at their next meeting. Beyond that further cuts could come in October or December and possibly at both meetings. Much will depend on labor market data. If the labor market is seen to be slowing, as July's jobs report suggests it could be, then the FOMC may elect to address that with lower interest rates, even if inflation remains a little above target.
Reuters
01-08-2025
- Business
- Reuters
Dissenting Fed officials tie votes to labor market concerns
Aug 1 (Reuters) - The two Federal Reserve governors who favored an interest rate cut at the U.S. central bank's policy meeting this week said on Friday they did so largely due to rising concerns about the job market, amid expectations that any price increases related to trade tariffs will not lead to lasting price pressures. "With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting," Vice Chair for Supervision Michelle Bowman said in a statement. "In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market," she said. Governor Christopher Waller said in a separate statement that "with underlying inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate." Waller said the job market is nearing stall speed and the Fed's rate target should be closer to its neutral level. Waller said of the Fed's broader approach to monetary policy right now that "I believe that the wait and see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve." The policymakers weighed in after casting dissenting votes against the Federal Open Market Committee's decision on Wednesday to hold its benchmark interest rate in the 4.25%-4.50% range. The dissents marked the first time that many governors had opposed the Fed's consensus view since late 1993. Comments made by Waller and Bowman going into the meeting had led many observers to expect their dissents. Waller has been most explicit in arguing for lower rates, saying the risks are rising for the job market while tariff-related inflation increases are likely to be a one-time shift the Fed could ignore. Bowman also expressed skepticism that tariffs would cause sustained inflation problems. The dissents also garnered interest because of the broader political currents buffeting the Fed. President Donald Trump has been pushing aggressively for rate cuts, excoriating Fed Chair Jerome Powell for failing to heed the White House's demands. Waller, who noted last month that his view was not "political" is widely considered to be in the running to succeed Powell when his term expires next May. Bowman, who was recently elevated to the Fed's bank overseer role by Trump, had previously been on the more hawkish end of the monetary policy spectrum, having dissented last fall in favor of a smaller rate cut than what the Fed delivered. Nodding toward the potential ambitions of the dissenters, Michael Feroli, chief U.S. economist at JP Morgan, described their votes on Wednesday as "two job applications attached" to the FOMC statement, even as he noted, "we don't read too much into these dissents for the future direction of policy." As for the rest of the Fed's policymakers, they voted in favor of holding rates steady because even as some risks to the outlook are emerging, they are still wary of what Trump's tariffs will do to price pressures. "The economy is in a solid position" and "for the time being, we're well positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance," Powell said at a press conference on Wednesday after the end of the Fed's two-day policy meeting. Powell appeared to see no downsides to the dissents. He described the FOMC gathering as a "good meeting" and added, "what you want from everybody, and also from a dissenter, is a clear explanation of what your thinking is and what are the arguments you're making ... We had that today." Powell did not indicate whether the dissenters had moved the consensus. "We haven't made any decisions about September. We'll be monitoring all the incoming data and asking ourselves whether the federal funds rate is in the right place." The Fed's next policy meeting is scheduled for September 16-17.
