Federal Reserve Expected to Cut Rates by Another 50 Basis Points in November, According to Reuters

The Federal Reserve is increasingly likely to implement a second 50-basis-point interest rate cut in November, according to traders’ bets made on Friday. This speculation follows a government report indicating that U.S. inflation has eased to a level closer to the central bank’s 2% target.

As reported by the Commerce Department, the year-over-year increase in the personal consumption expenditures price index, which is the Fed’s preferred inflation measure, stood at 2.2% in August.

This aligns with comments made by Fed Chair Jerome Powell during a news conference after last week’s half-point cut. The initial reduction is anticipated to be the beginning of a series of policy rate cuts, aimed at supporting what Fed officials view as a softening yet robust labor market.

Analyst Omair Sharif noted that if the Fed intends to cut rates by another 50 basis points in November, the inflation figures are unlikely to hinder that decision. He added that a quicker decline in inflation creates greater motivation for the Fed to expedite its return to a neutral rate.

Current interest rate futures indicate a 54% probability of a half-point cut in November, compared to a 46% likelihood of a quarter-point reduction.

Traders are also forecasting that the policy rate, presently ranging from 4.75% to 5.00%, will decrease by 75 basis points by the end of the year and will fall to between 3.00% and 3.25% by mid-2025. This projection sits just above the neutral rate identified by most Fed policymakers, a level that does not either stimulate or restrain a healthy economy.