Fed delivers its third consecutive rate cut, but signals caution for the future

Yesterday evening the Federal Reserve (the Fed) opted to cut the federal funds rate by 0.25 percentage points, marking the third consecutive meeting to yield lower rates.

Following the lengthy government shutdown, the production of official data remains disrupted, creating challenges for policymakers and obscuring the true state of US economic performance.

The limited indicators available point to slowing job gains alongside elevated inflation.

Ultimately, in accordance with revised Cebr projections, the Fed has placed greater weight on the downside risks to employment in this meeting, which culminated in a split decision. That said, the path for future reductions is less clear; trade-related inflationary pressures and lingering uncertainty are likely to muddy the water for the central bank. Cebr expects that, in the January meeting, caution will prevail and the Fed will hold following a ‘hawkish cut’ this month.