As expected, the Federal Reserve trimmed another 25 basis points from its benchmark interest rate in November, bringing it to a target range of 4.5%-4.75%.
The reduction, approved unanimously by the Fed’s policy-setting Federal Open Market Committee (FOMC), was the second straight rate cut from the Fed following September’s long-awaited 50-basis-point cut.
The statement released by the FOMC on Thursday after its November meeting was little changed from the one it released in September, noting that “labor market conditions have generally eased” and “inflation has made progress toward the committee’s 2% objective but remains somewhat elevated.” Interestingly, the FOMC removed a sentence present in its last statement affirming that it had gained greater confidence that inflation is moving sustainably toward that 2% goal, although it confirmed that it “judges the risks to achieving its employment and inflation goals are roughly in balance.”
The Fed remained positive on the economy, saying that it “has continued to expand at a solid pace.”
“Our mandate is maximum for employment and price stability,” said Federal Reserve Chairman Jerome Powell at his customary post-meeting press conference. “And we think that even with today’s cut, [the Federal Reserve’s monetary] policy is still restrictive. We understand it’s not possible to say precisely how restrictive, but we feel that it is still restrictive.
“And if you look at our goal variables, the labor market has cooled a great deal from its overheated state of two years ago and is now essentially in balance. It is continuing to cool, albeit at a modest rate, and we don’t need further cooling, we don’t think, to achieve our inflation. So that’s the labor market. Inflation has moved down a great deal from its highs of two years ago, and we judged … that it’s on a sustainable path back to 10%. So the job’s not done on inflation. But if you look at those two things, we judged in September that it was appropriate to begin to recalibrate our policy stance to reflect this progress. And today’s decision is really another step in that process overall.”
Notably, many within the lending industry don’t expect the cut to move the needle much in terms of interest rates, since the cut was broadly projected leading up to the FOMC meeting.
“Today’s anticipated rate cut has already been priced in by mortgage lenders and is unlikely to lower home lending costs in the immediate future,” said Lloyd San, senior vice president of enterprise business development at Voxtur. “The primary reason is that there is a flight to safety in the bond markets due to post-election volatility. This is driving the up rates on 10-year Treasuries, which are more directly correlated to mortgage rates.”
“Volatility in treasuries has been the bigger catalyst for recent mortgage rate movement as opposed to the Fed’s rate cuts so far,” echoed Eric Orenstein, senior director at Fitch Ratings. “Still, the Fed’s easing cycle should take pressure off origination volumes in 2025 as more mortgages become ripe for refinancing.”
Notably, with the election so fresh in the rearview, Powell was asked if the Fed had considered the potential impacts from Donald Trump’s reelection — like the tariffs that were part of his campaign platform — when making its rate-cut decision. Powell, however, declined to answer most questions relating to politics, the election or the president-elect.
However, Powell did address inquiries relating to whether he would step aside from his post if asked by Trump. Citing a senior adviser to the incoming president, CNN had reported earlier on Thursday that Trump would likely allow Powell to serve the remainder of his term as chair, though Trump has been coarsely critical of Powell and the Federal Reserve on multiple occasions.
Asked if he would step down, Powell answered with a curt, “No.” And asked if he believed that the president had the power to fire or demote him, Powell replied, “Not permitted under the law.”
Powell’s term lasts until May 2026.