The Federal Reserve lowered its benchmark interest rate by 25 basis points to a target range of 4.50-4.75% in their November meeting, citing that inflation has “made progress” towards their objectives.
FOMC policy details:
- Target federal funds rate lowered by 0.25% to 4.50-4.75% range
- Interest rate on reserve balances adjusted to 4.65%
- Overnight reverse repo rate set at 4.55%
- Continue monthly caps of $25 billion for Treasury securities and $35 billion for agency debt/MBS
In their official statement, policymakers acknowledged “solid” economic expansion while noting eased labor market conditions. They also noted that risks to employment and inflation goals are “roughly in balance” so future rate decisions will depend on careful assessment of incoming data and evolving outlook.
Link to official FOMC Statement (November 2024)
It’s worth noting that the Fed removed wording on “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent” and the reference on “In light of the progress on inflation” compared to their September statement.
When asked about these changes during the press conference and whether or not it implied a “December pause,” Fed head Jerome Powell cautiously responded:
“Not really, no… We don’t think it’s a good time to be doing a lot of forward guidance. There is a fair amount of uncertainty. We are on the path to our destination but we don’t know the exact destination and the pace.”
As for the U.S. election results and its potential impact on Fed policy, Powell mentioned that “In the near-term, the election will have no effect. We don’t know what the timing and effects of policy changes may be. We don’t guess, we don’t speculate and we don’t assume.”
Link to FOMC Press Conference (November 2024)
Market Reactions
U.S. Dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar showed mixed reactions in the aftermath of the announcement. Initial volatility emerged following the FOMC statement release, with further price swings during Chair Powell’s press conference.
The initial reaction to the actual statement was a generally bullish one, as the U.S. currency popped sharply higher before pulling back ahead of the presser, which then spurred a slight dip across the board.
Afterwards, the dollar rallied right back up to its intraday post-FOMC highs against most of its counterparts, followed by an even larger pullback and consolidation for the rest of the session.
By the end of U.S. market hours, the dollar had strengthened most against the New Zealand dollar (+0.28%) and Australian dollar (+0.21%) while modest gains were seen versus the euro (+0.19%) and British pound (+0.15%). Minimal changes occurred against the Japanese yen (+0.03%) and Canadian dollar (+0.04%).
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