- The Federal Open Market Committee has three scheduled meetings remaining in 2024, and markets expect interest rates to be cut at all of them.
- FOMC policymakers, including Chair Jerome Powell, have signaled that interest rate cuts are coming as inflation eases and the labor market weakens.
- Fixed income markets are looking for a federal funds rate reduction of 0.75% to 1.5% by the end of 2024, with rates potentially ending the year a little over 4%.
The Federal Open Market Committee (FOMC) has three more meetings scheduled for 2024. Markets expect interest rates to be lowered at each one. FOMC policymakers have signaled that rate cuts are likely as inflation falls back towards the 2% target.
FOMC Policymakers Continue to Signal Rate Cuts Are Coming
FOMC voting members like Chair Jerome Powell have said it’s time for policy to become less restrictive. Statements from presidents of regional Federal Reserve banks also point to easing. For example, Atlanta Fed President Raphael Bostic said on September 4th that policy can’t stay restrictive for too long with inflation falling.
New York Fed President John Williams made similar comments on September 6th, noting it’s now appropriate to reduce the restrictiveness of policy by lowering rates. So the message from FOMC voters is clear – rate cuts are imminent.
How Much Easing is Needed?
The key questions are how much will rates be cut and what level will be considered appropriately non-restrictive? Markets expect 0.75% to 1.5% of cuts by December, taking the fed funds rate just above 4%.
This suggests rate cuts at all remaining 2024 FOMC meetings. There’s potential for larger 0.5% cuts as well. The FOMC’s September meeting and updated economic projections should provide more clarity on expectations.
Remaining 2024 FOMC Meeting Schedule
The FOMC has meetings remaining on:
- September 18
- November 7
- December 18
Rate decisions are at 2pm ET with a Powell press conference after. The September and December meetings also include updated economic forecasts.
What to Expect
It seems likely rates will be lowered at the remaining 2024 FOMC meetings based on policymaker comments and market pricing. The key uncertainties are the magnitude of the cuts and the eventual terminal fed funds rate.
For now, markets expect rates to fall steadily into 2025, ending around 3%. But the medium-term outlook is uncertain. The clearest expectation is that policy will become less restrictive, with falling rates through year-end 2024.
Conclusion
FOMC policymakers have set the stage for interest rate cuts for the remainder of 2024 as they respond to falling inflation. Markets expect this easing to begin at the September meeting. While the timing and magnitude of rate declines is uncertain, the direction towards less restrictive policy is clear.
