The slow decline of the cost of borrowing went down one more step. Can another step follow in December? And what happens when Donald Trump returns to the White House? How will he try to influence the independent federal body that governs monetary policy?
Another Cut
This time the Federal Open Market Committee was less aggressive in its action announced Thursday to reduce the federal funds rate 0.25%, rather than the 0.50% reduction that it took in its previous meeting.
The latest cut fell in line with what analysts expected and reflect the strength of the economy as the calendar moves toward the end of 2024. The Fed has tried to carefully ease off interest rates as it has balanced slowing the economy without pushing it into a recession, while remaining mindful of the unemployment rate.
While the actions seem to have avoided the country’s plummet into recession, they have also lowered borrowing costs slowly. Farmland owners who need to finance expansion or those wanting to buy land for the first time may be put off by increased terms by lenders.
A 0.25% cut won’t likely ease a lot of apprehension.
RELATED: CBS News followed the action by the FOMC and explained how the initial benefits to borrowers will be minimal. Read that here.
More Cuts Coming?
The next question for the Fed will be whether another cut could come at the next meeting in December, perhaps by another 0.25% if the economy remains similar to its current state.
“In assessing the appropriate stance of monetary policy, the (Federal Open Market) Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals,” the FOMC said in a statement Thursday as it looked ahead.
“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
A December reduction would bring the third cut of the year.
RELATED: Here is the full statement from the Federal Open Market Committee after members agreed to reduce the federal funds rate.
The Transition Ahead
America is about to get a new president, and it is a president who expects others to follow his wishes. How would Federal Reserve Board Chair Jerome Powell handle the situation if Donald Trump demands his resignation for failing to act like Trump wants? Would he step down?
“No,” was the one-word response from Powell when reporters asked him that question Thursday after the announcement of the federal funds rate reduction.
Trump appointed Powell to the Fed in 2018 during his first term as president but publicly pressured him to reduce rates and criticized him for failing to do that.
Powell reminded reporters that the president, any president, does not have the legal authority to remove a Federal Reserve Board Chair before the committee member’s term expires.
Powell’s term expires in 2026.
RELATED: Check out this story from Forbes on how Federal Reserve Board Chair Jerome Powell had to navigate questions about the future following Tuesday’s presidential election.
