Federal Reserve Interest Rate Decision Overview
Federal Reserve Interest Rate Decision Overview
Date & Time :December 18, 2024, at 2:00 PM Eastern / 1:00 PM Central
The U.S. Federal Reserve interest rate decision, made by the Federal Open Market Committee (FOMC), sets the target range for the federal funds rate, which is the interest rate at which banks lend and borrow overnight funds. This decision influences overall financial conditions, affecting borrowing costs for consumers and businesses, as well as economic activity, inflation, and employment.
Key Points about Core Retail Sales
- Purpose: The primary goals are to achieve maximum employment and stable prices (inflation around 2%).
- Frequency: The FOMC meets eight times a year to review economic conditions and adjust the federal funds rate if necessary.
- Announcement: The decision is announced after each FOMC meeting, typically followed by a press conference with the Fed Chair to explain the decision and provide economic projections.
- Impact: Changes in the federal funds rate can affect various financial markets, including stock markets, bond markets, and currency markets, as well as consumer and business borrowing costs.
Today's Meeting Expectations
The U.S. Federal Reserve is expected to make its final interest rate decision of 2024 on December 18, 2024. The FOMC will announce its decision at 2:00 PM Eastern Time (ET), followed by a press conference with Fed Chair Jerome Powell at 2:30 PM ET.
- Expected Rate Cut: Economists anticipate a 25 basis point rate cut, bringing the federal funds rate to a target range of 4.25%-4.5% from the current 4.5%-4.75%.
- Economic Projections: The FOMC will also release its Summary of Economic Projections, including the "dot plot" which provides insights into the future path of interest rates.
- Inflation and Employment: The decision will take into account recent inflation data and employment trends. November's Consumer Price Index (CPI) rose by 2.7%, indicating ongoing inflationary pressures.
Why Traders Care
Traders closely monitor Fed interest rate decisions due to their significant impact on financial markets and the broader economy. Key reasons include:
- 1. Market Volatility: Changes in interest rates can lead to increased market volatility. Higher rates can cause stock prices to fall, while lower rates can boost stock prices.
- 2. Currency Values: Interest rate decisions affect currency exchange rates. Higher rates can strengthen the U.S. dollar as investors seek higher returns, while lower rates can weaken the dollar.
- 3. Borrowing Costs: Interest rates influence borrowing costs for consumers and businesses. Higher rates can make borrowing more expensive, potentially slowing down economic activity, while lower rates can stimulate borrowing and spending.
- 4. Inflation Control: The Fed adjusts interest rates to control inflation. Higher rates can help curb inflation by reducing spending, while lower rates can increase spending and potentially lead to higher inflation.
- 5. Investment Returns: Interest rates affect the returns on various investments, including bonds and savings accounts. Traders need to consider these changes when making investment decisions.
Impact on Financial Markets
- 1. Stock Market: Lower interest rates can boost stock prices as borrowing costs decrease, making it easier for companies to finance expansions and improve profitability. Investors may also seek higher returns in stocks as bond yields fall.
- 2. Bond Market: Bond prices typically rise when interest rates fall, and yields decrease. This happens because existing bonds with higher interest rates become more attractive compared to new issues with lower rates.
- 3. Currency Market: Lower interest rates can lead to a weaker currency as investors seek higher returns in other countries. This can make exports cheaper and more competitive internationally.
Key Information
- Issuer: : The FOMC
- Expectation: 25 basis points rate cut to 4.25%-4.5%
- Date and Time: December 18, 2024, at 2:00 PM Eastern / 1:00 PM Central
- Usual Effect: Lower interest rates send stocks up, US-based pairs fall, US quote pairs rise; commodity and bond markets rally.