Economists and investors await results from today’s Federal Open Market Committee (FOMC) meeting and what they mean for interest rates. The Federal Reserve is expected to cut interest rates by 25 basis points, dropping them to between 4.25% and 4.50%. This would mark the third interest rate cut since September.
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The Federal Reserve aims to decrease interest rates to 2% after increasing them over the last couple of years to combat rising inflation. Experts are predicting the Fed will announce an interest rate cut today even as economic concerns, including increasing inflation and a strong jobs market, leave them unsure if it’s the right thing to do.
How Will This Affect the Stock Market?
The Federal Reserve will release its FOMC meeting results today at around 2:00 p.m. ET. Chairman Jerome Powell will follow that with a press conference roughly half an hour later.
If the Fed moves forward with an interest rate cut today, it will likely benefit the stock market. This could result in the S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) rising today, and potentially throughout the rest of the week. That seems more likely for the S&P 500 due to its heavy focus on tech stocks, which are strongly affected by interest rates.
On the flip side are concerns that the central bank will provide strong warnings about its 2025 plans. This could result in a more timid response from indices today as investors absorb the news.
What Will the Fed Do in 2025?
While an interest rate cut is likely today, it’s unclear what the Fed will do next year. Originally, it expected to drop interest rates to the 3.25% to 3.5% range by the end of that year. However, the strengthing of the economy may delay that plan.
Another factor weighing on any central bank plans next year is Donald Trump taking over as President. Trump has announced plans for heavy tariffs once he takes office. This could strongly affect the U.S. economy, ultimately changing the Fed’s plans to cut interest rates further.
