Next FOMC Meeting and Fed Rate Decision: What to Expect in September 2024

The Federal Reserve’s next Federal Open Market Committee (FOMC) meeting is set for September 17-18, 2024. This meeting is highly anticipated by investors, economists, and policymakers, as it could mark a pivotal shift in U.S. monetary policy. The Fed is expected to cut its benchmark federal funds rate for the first time in over four years.

The federal funds rate has been held in the 5.25%-5.50% range, the highest since 2001, for over a year. This prolonged period of high rates was aimed at controlling inflation, but with inflation gradually moderating and signs of cooling in the labor market, the Fed is preparing to ease its policy. However, the magnitude of the rate cut is still debated among market participants, with some expecting a 25-basis-point cut and others predicting a more aggressive 50-basis-point reduction.

Key Takeaways

• The Federal Reserve is expected to cut its benchmark rate for the first time since 2019.
• The Fed funds rate has been kept at a two-decade high of 5.25%-5.50% for over a year.
• The September meeting will be closely watched, with the potential for either a 25 or 50 basis-point cut.

Latest Fed Moves: July 2024 Meeting Recap

During the most recent FOMC meeting in July 2024, the Federal Reserve held rates steady at 5.25%-5.50%, as expected. This decision allowed the Fed more time to assess whether current rates are effectively keeping inflation in check without stifling economic growth. In its post-meeting statement, the Fed emphasized that they need greater confidence that inflation is moving sustainably toward their 2% target before cutting rates.

The Fed had previously raised rates 11 times during its tightening cycle from 2022 to 2023 to curb inflation, which had reached 9%. Since July 2023, rates have remained unchanged, reflecting a cautious approach as inflation gradually declined. Although inflation has moved closer to the Fed’s target, it hasn’t yet reached the desired level.

What Happens at Fed Meetings?

The FOMC is the Federal Reserve System’s monetary policy-making body. It consists of 12 members: the seven governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and four of the remaining 11 Reserve Bank presidents, who serve on a rotating basis.

The FOMC meets eight times a year to discuss economic conditions and make decisions about interest rates and other financial policies. These decisions have far-reaching impacts on everything from savings accounts to mortgage rates. Each FOMC meeting concludes with a statement summarizing the Committee’s economic outlook and policy decisions. The Fed also publishes the Summary of Economic Projections (SEP) four times a year, which outlines its forecasts for key economic variables such as inflation, GDP, and employment.

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What to Expect in the September 2024 Meeting

Looking ahead to the September 2024 FOMC meeting, there’s widespread expectation that the Fed will cut the fed funds rate. The only uncertainty lies in whether it will be a 25 or 50 basis-point cut. Fed Chair Jerome Powell and other officials have made it clear that rate cuts are on the horizon, even though inflation remains slightly above the Fed’s 2% target.

The key reason behind the upcoming rate cuts is the Fed’s concern about the weakening labor market. While inflation has moderated, the job market has shown signs of slowing, which could pose a risk to the economy if left unchecked.

However, the decision to cut by 50 basis points, as some economists predict, could send a strong signal that the Fed is bracing for a significant economic slowdown. On the other hand, a smaller, 25 basis-point cut would suggest a more measured approach, keeping the door open for future rate adjustments depending on economic data in the coming months.

The FOMC’s quarterly economic projections will also be released at the September meeting, which will provide further insight into the Fed’s outlook for inflation, GDP, and the job market. Investors will closely scrutinize these projections to gauge the likelihood of additional rate cuts later in the year.

Most Recent Fed Meeting (July 2024)

In July 2024, the Fed opted to keep interest rates steady at 5.25%-5.50%, continuing the pause that began after its aggressive rate hikes in 2022-2023. This period of tightening included 11 rate hikes aimed at curbing rising inflation. While inflation has since moderated, the Fed remains cautious, signaling that it will not lower rates until there is more definitive progress toward its 2% inflation target.

Despite the steady rate, the Fed is actively monitoring economic indicators such as the Consumer Price Index (CPI), payrolls, and GDP growth to determine the appropriate course of action. At the July meeting, the Fed reaffirmed its commitment to its dual mandate of maximum employment and price stability.

While the U.S. economy remains strong, the Fed acknowledged that growth had slowed compared to 2023. This slowdown, coupled with the cooling labor market, is likely to influence the Fed’s decision-making process in the coming months.

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Will the Fed Cut Rates This Year?

Fed Chair Jerome Powell has indicated that “the time has come for policy to adjust,” signaling that rate cuts are imminent. However, the pace and depth of these cuts are still undecided. The Fed’s focus has shifted to controlling inflation while ensuring that the labor market remains stable.

Most analysts expect the Fed to implement multiple rate cuts before the end of 2024, though the extent of these cuts will depend on upcoming economic data.

The Bottom Line

The September 2024 FOMC meeting is expected to bring the first rate cut in over four years, signaling a shift in monetary policy. While the Fed funds rate has been held at 5.25%-5.50% for more than a year, experts believe that economic conditions will prompt the Fed to begin easing. The decision on whether to cut by 25 or 50 basis points will depend on inflation data, labor market conditions, and other economic indicators. Investors will also closely watch the FOMC statement, economic projections, and Chair Powell’s comments for clues on the future direction of U.S. monetary policy.

The September meeting marks a critical point for the U.S. economy, and its outcome will have lasting impacts on interest rates, the U.S. dollar, and global financial markets.