Latest / Markets with Megan: A Quick Financial Markets Update / Fed's Rate Cut and Geopolitical Tensions | Episode 188 | 11-07-24
Transcript
- 0:00Megan Horneman: As expected, the Fed cut interest rates again.
- 0:03Megan Horneman: Today it is Thursday, November the 7th and we are just a couple days after the election and the Federal Reserve did deliver the interest rate cut that was priced into the market.
- 0:12Megan Horneman: They cut interest rates by 25 basis points to a range of 450 to 475.
- 0:19Megan Horneman: But let's take a look at some of the comments that came out of not only their statement but also Federal Reserve Chairman his press conference.
- 0:27Megan Horneman: So first of all, in their statement they did remove the reference of them gaining confidence on inflation.
- 0:34Megan Horneman: Instead, they said that the inflation has made progress towards its 2% goal.
- 0:39Megan Horneman: They did continue to mention that the risks between employment and inflation are balanced.
- 0:45Megan Horneman: But that removal of them gaining confidence has raised some eyebrows not necessarily for the bond market today, but it has raised some eyebrows and we've been discussing that some of those sticky inflation indicators have remained elevated.
- 0:59Megan Horneman: They did make a mention that the economic data they last met has actually come in stronger than expected, so it's taking away some of the downside risks.
- 1:09Megan Horneman: They also mentioned that they would continue to be meeting by meeting.
- 1:13Megan Horneman: They said that by December they'll have more data on inflation and employment.
- 1:19Megan Horneman: So December is not necessarily set in stone that's still up in the air.
- 1:24Megan Horneman: They're going to look at all of the incoming data Right now.
- 1:29Megan Horneman: They continue to say that they're just recalibrating the monetary policy from this tight level, and there was some questions in the press conference about the incoming administration, and what they mentioned was that, in the near term, this election and its results have no effects at all on policy decisions.
- 1:47Megan Horneman: They don't comment on fiscal policy and they will factor it into the models when any laws pass, so at this time, they're not factoring in any of the campaign items from the Trump administration, which they shouldn't.
- 2:03Megan Horneman: Let's see what we get into in 2025.
- 2:05Megan Horneman: One of the things they did mention, though, is that, from the risk side, is that geopolitical risks still remain very elevated, and it does put.
- 2:13Megan Horneman: What they're concerned about is if it filters into the oil market.
- 2:18Megan Horneman: That could have upside risks to inflation.
- 2:21Megan Horneman: They also did make some mention about fiscal policy being on an unsustainable path.
- 2:27Megan Horneman: Now how's the market dealing with this today?
- 2:28Megan Horneman: Honestly, the bond markets rally, so we're seeing yields actually slightly lower, but let's not forget that yesterday we saw a big rise in interest rates across the curve, so this may be just giving back some of what we got yesterday.
- 2:42Megan Horneman: The equity market is up a little bit.
- 2:45Megan Horneman: It's been kind of flat most of the day, so they're not taking much out of this.
- 2:49Megan Horneman: This was expected, so there's no big surprises here.
- 2:52Megan Horneman: We'll continue to monitor this data coming forward to try and get a better idea of what may happen in December.
- 2:59Megan Horneman: But right now there are some of the futures market that's pricing out interest rate cuts for December and possibly pushing them into January.
- 3:07Megan Horneman: That's all we have today.
- 3:09Megan Horneman: If you like this podcast, please subscribe, hit that alarm bell, share it with friends and colleagues and, as always, if you'd like to see any of our history of our podcast, please go to marketswithmegan fm.
- 3:20Megan Horneman: Thank you,