Fed Surprises With An Aggressive Rate Cut

On September 18, 2024, Fed released its FOMC Statement. The central bank noted that it had gained greater confidence that inflation was moving sustainably towards its 2 percent target. As a result, Fed cut the federal funds rate by 50 bps. Analysts expected that Fed will cut the rate by 25 bps.

Fed also released its economic projections. The Unemployment Rate projection for 2024 was raised from 4.0% to 4.4%. PCE Inflation projection was cut from 2.6% to 2.3%, while Core PCE Inflation projection was reduced from 2.8% to 2.6%.

Fed expects aggressive rate cuts in the future. The central bank believes that federal funds rate would drop to 4.4% by the end of 2024, compared to the previous forecast of 5.1%. The forecast for 2025 was changed from 4.1% to 3.1%.

U.S. Dollar Index found itself under strong pressure as traders reacted to the 50 bps rate cut. Currently, U.S. Dollar Index is trying to settle below the 100.50 level.

Gold moved above the $2585 level as traders focused on weak dollar and the new Fed policy outlook.

SP500 made an attempt to settle above the 5700 level as traders focused on dovish Fed.

For a look at all of today’s economic events, check out our economic calendar.