Fed to Cut Rates By 25 Basis Points On Sept. 18, With Two More Cuts Expected in 2024

The Federal Reserve will lower interest rates by 25 basis points at each of the US central bank's three remaining policy meetings in 2024, according to a majority of economists surveyed in a Reuters poll.

A strong majority of economists in the Sept. 6-10 poll, 92 of 101, expect a 25-basis-point cut when the US central bank's Federal Open Market Committee (FOMC) concludes its two-day meeting.

Only nine out of 101 respondents expected a half-percentage-point cut next week, as reported by Indradip Ghosh for Reuters.

With inflation approaching the Fed's 2% target and some signs of an economic slowdown, policymakers have indicated that "the time has come" to begin reducing the federal funds rate, which has been held in the 5.25%-5.50% range since July 2023.

Following the release of a mixed jobs report for August, interest rate futures contracts briefly reflected more than a 50% chance of a half-percentage-point cut next week, though the likelihood has since narrowed to about one in four.

Rate markets are still pricing in over 100 basis points of cuts by the end of the year.

Recent remarks from New York Fed President John Williams and Fed Governor Christopher Waller did not suggest any support among policymakers for an outsized rate cut this month.

A strong majority of economists in the Sept. 6-10 poll, 92 of 101, expect a 25-basis-point cut when the US central bank's Federal Open Market Committee (FOMC) concludes its two-day meeting.

"The employment report was soft but not disastrous. On Friday, both Williams and Waller did not offer explicit guidance on the pressing question of 25 basis points vs. 50 on Sept. 18, but their relatively benign assessment of the economy strongly points to a 25-basis-point cut," said Stephen Stanley, chief U.S. economist at Santander.