Quarter-Point Rate Cut From FOMC After Trump’s Election
By PATRICK LAVERY
Donald Trump’s victorious performance on Election Night that will return him to the presidency in 2025 portends to cast a long shadow over housing affordability, but for now, the Federal Reserve Board is continuing a resumption of rate cuts that began in mid-September by slashing its key interest rate another quarter of a point, Fed Chairman Jerome Powell announced Thursday after the latest meeting of the Federal Open Market Committee.
That meeting was delayed a day from when the FOMC would have usually convened due to the election, as is customary.
“Inflation has eased substantially from a peak of 7% to 2.1% as of September. We are committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2% goal,” Powell said in prepared remarks delivered to the media Thursday afternoon. “We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2%.”
Powell characterized current activity in the housing sector as “weak,” contrasting it with a solid overall pace of economic activity, in particular growth of consumer spending, and investment in equipment and intangibles.
Real estate industry professionals say Trump’s election back to the Oval Office could translate to higher interest rates and more expensive housing, which could in turn discourage prospective buyers from entering the market. That would be a 180-degree reversal from when Trump left office in early 2021, with the United States still in the throes of the COVID-19 pandemic. Median home prices were higher at that time as well, but in that case it was almost unprecedented demand, and comparatively little supply, primarily driving the market.
Powell said that the Fed was “not on any preset course” about further action after what was decided Thursday, and that data from housing and other sectors would continue to be analyzed meeting by meeting.
“We see the risks to achieving our employment and inflation goals as being roughly in balance, and we are attentive to the risks to both sides of our mandate,” he said.
As has been the norm after most Fed meetings in recent memory, the Implementation Note released Thursday directed the Open Market Desk of the Federal Bank of New York to, among other things, reinvest principal payments from holdings of agency debt and mortgage-backed securities received each calendar month, exceeding a cap of $35 billion, into Treasury securities.
The FOMC meets for the final time in 2024 on Dec. 17 and 18, at which the last Summary of Economic Projections of the year will also be released. At the beginning of 2024, Powell and other officials had hinted that three rate cuts might be coming in the year ahead, which could theoretically still happen.
The first meeting of 2025 will come approximately 10 days after Trump’s reinauguration, on Jan. 31 and Feb. 1.