The November 2024 Federal Open Market Committee (FOMC) meeting is shaping up as a relatively low-profile event, overshadowed by the ongoing U.S. election results. With Republican candidate Donald Trump likely securing the presidency and possibly the Senate, market focus remains on political shifts rather than purely on monetary policy. However, the Fed’s expected quarter-point rate cut still holds significance for economic outlooks as inflation and job growth data present mixed signals.

Expected Rate Cut Amid Mixed Economic Signals

The consensus expectation is for a 25 basis point (bps) reduction in the Federal Funds Target Range to 4.50%-4.75%, aligning with the predictions of major financial institutions like Bank of America. The Fed appears cautious about altering its messaging, with Chair Jerome Powell likely to maintain his “meeting-by-meeting” approach, emphasizing flexibility in response to incoming data. Though October jobs data missed forecasts significantly with just 12,000 jobs added, core inflation is firming, suggesting the economy is resilient in some areas despite slowing employment growth.

Implications for December’s Meeting

The mixed signals in recent economic data complicate the December outlook. A preliminary Q3 GDP growth of 2.8% indicates robust economic activity, yet with October’s weaker job creation, there are lingering questions around labor market strength. Core inflation is expected to remain above the Fed’s projections, with Barclays suggesting a potential risk of inflation exceeding the Fed’s Q4 2024 projection of 2.6%.

Markets currently assign a 60% probability to another 25 bps cut in December, but persistent inflation or job market resilience could prompt a pause. This prospect raises uncertainty, with the Fed likely to closely monitor inflation data and labor market developments in the weeks ahead.

Communication Strategy

Powell’s press conference, set for Thursday at 19:30 GMT, is expected to remain neutral, reiterating the Fed’s commitment to data dependency without setting a predetermined course. This restrained communication style reflects the Fed’s likely desire to avoid further market volatility amid the political shifts accompanying the election results.

Thursday’s decision may pass with minimal market impact, as investors shift focus to December’s meeting. With inflation and labor data showing potential risks to further easing, the Fed’s messaging will likely emphasize adaptability, reflecting economic uncertainties and a cautious path forward.