Fed cuts in-line with expectations

The Federal Reserve trimmed its policy rate by 25 basis points to 4.5% to 4.75% at its November meeting on the heels of its 50-basis point cut in September.

A reduction of this size was expected by nearly all economists heading into the meeting, and priced into short-term interest-rate markets. Unlike September’s jumbo rate cut, Thursday’s decision was unanimous.

Of note: the policy statement removed references to there having been “further” recent progress in getting inflation lower, which may be a nod to the slight firming in price pressures since its last policy decision.

Treasury yields moved off their lows of the day as markets digested the communique.

During the press conference, Fed Chair Jerome Powell said there was not much policy substance behind those changes to the statement.

Coming into this decision, 2-year Treasury yields were little changed since the election. Longer-term US government yields, however, had risen meaningfully on a combination of higher inflation, growth, and policy uncertainty over the medium term.