After the Federal Reserve’s November 6-7, 2024, policymakers decided to cut rates again. This time, it lowered rates by 25 bps, citing satisfaction with the job market and inflation within its 2.0% target rate.
Fed Chair Powell said that the presidential election outcome has no near-term impact on its monetary policy. This is despite expectations of widespread deportation of immigrants, tariffs against China and its trading partners, and income tax cuts.
Stock markets disagreed with the Fed’s assessment. Bank stocks fell in Thursday’s trading. JP Morgan (JPM), American Express (AXP), and Wells Fargo (WFC) were among the stocks down on the day. The increased government spending and lower tax rates will stimulate consumption. It adds to inflation, risking to undo the Fed’s efforts to lower it.
The benchmark overnight interest rate is now 4.50% to 4.75%. This should have a positive impact on the economy.
The U.S. Treasury bond market yields fell in response. The yield curve flattened after the Fed’s policy decision. Stock and bond markets are expecting another 25 bps cut in the next Fed meeting in December.
Lower rates support higher valuations for technology stocks. Apple (AAPL), Nvidia (NVDA), AMD (AMD), Intel (INTC), and Broadcom (AVGO) are the notable firms rallying after the rate cut.
