"When is the next Fed meeting?" is a question that hasn't weighed this heavily on anxious investors' minds in probably four decades.
Which is fair enough, really. The worst bout of inflation to hit the U.S. economy in 40 years peaked more than two years ago, and yet the Federal Reserve has only just begun its easing campaign.
The Federal Reserve at long last brought borrowing costs down from a 23-year high in September, slashing interest rates by a surprising half-percentage point. With the easing cycle now underway, experts say the size and pace of future policy moves will determine whether the central bank can pull off a rare soft landing of the economy.
The Federal Open Market Committee (FOMC) wrapped up its last policy meeting by cutting the short-term federal funds rate by 50 basis points (bps), or 0.5%, to a target range of 4.75% to 5%. Markets were essentially split on whether the Fed's rate-setting committee would ease by 25 bps or 50 bps heading into the decision.
New language in the central bank's policy statement stressed that it has become more concerned about the health of the labor market as inflation continues to recede.
"Job gains have slowed, and the unemployment rate has moved up but remains low," said the FOMC in a statement. "The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective."
The Fed has a dual mandate. In addition to stable prices, the central bank is supposed to support maximum employment. With the lagged effects of restrictive monetary policy beginning to show up in the jobs market, the first rate cut was a foregone conclusion.
"The Fed went big and cut 50 bps to get ahead of downward trending labor market data, while also projecting 100 bps of cuts for 2024," wrote Sonu Varghese, global macro strategist at Carson Group. "They also projected the unemployment rate to max out at 4.4% in 2024 and 2025, which justifies the dovish posture."
The question now is whether the Fed will maintain its current pace of half-point cuts. Although economists as a group have become more optimistic about the path of the economy, surveys show they still put the odds of a recession hitting in the next 12 months at about 33%. They have good reasons to remain cautious. You can still find inverted yield curves in parts of the bond market, for one thing, which is not very reassuring. For what it's worth, the New York Fed's yield-curve model gives a 57% probability to the U.S. entering a recession over the next 12 months.
Then there's the labor market, which shows signs of cooling. Jobs growth was essentially unchanged last month, as disruptions from two hurricanes and the Boeing (BA) strike put a damper on hiring. Although job creation came in far below estimates, stable wage pressures and a steady unemployment rate should keep the Federal Reserve on track for a gradual pace of rate cuts, experts say.
The bottom line? When you consider the Fed's dual mandate against the backdrop of a mid-cycle economic expansion (easing inflation, slackening in the labor market), it kind of makes sense that folks are obsessed with the question of "when is the next Fed meeting?"
The fact that lower interest rates today equal higher returns for equities tomorrow also makes rate cuts rather attractive to market participants.
The next Fed meeting: what to expect
For the record, the central bank's rate-setting committee is called the Federal Open Market Committee (FOMC).
As you can see from the FOMC meeting calendar below, the committee meets eight times a year. These meetings last two days and conclude with the FOMC releasing its policy decision at 2 pm Eastern time. The Fed chief then holds a press conference at 2:30 pm. (Pro tip: as closely scrutinized as the Fed statement might be, market participants are usually even more keen on what the Fed chair has to say in the press conference.)
As for the next Fed meeting, it will begin on November 6 and conclude with a policy statement on November 7 at 2 pm Eastern. A quarter-point cut is by far and away the betting favorite.
As of November 5, interest rate traders assigned a 99% probability to the FOMC slicing the short-term federal funds rate by 25 bps to a target range of 4.50% to 4.75%, according to CME Group's FedWatch Tool. The remainder, or 1%, expect the FOMC to leave rates unchanged.
For those wondering "when is the next Fed meeting?," have a look at the schedule, courtesy of the FOMC, below.
