FOMC lowers rates by 25 points, won’t “speculate” or “assume” on Trump policies

Key points

• The FOMC lowered the federal funds rate by 25 basis points.

• Fed Chair Powell said Fed would not speculate on Trump policies and their potential impact.

• Powell said he would not resign if asked.

Fed chair Powell was asked if he would resign, if asked by the new president.

The Federal Open Market Committee (FOMC) lowered the federal funds rate by one quarter of a percentage point, or 25 basis points, at its meeting November 6 and 7.

The move was largely expected, as 97% of interest traders had targeted the 25-basis-point drop, according to CME’s FedWatch survey.

The markets mostly took it in stride, as the S&P 500 was up about 1% on the day to around 5,975. But the S&P 500 did spike to an all-time high of 5,983 during Fed Chair Powell’s 2:30 p.m. ET press conference.   

With the quarter-point reduction, the federal funds rate is now in the 4.50% to 4.75%-point range. This is the second straight rate reduction after the Fed lowered rates in September by 50 basis points, from a high of 5.25% to 5.50%. The federal funds rate is important because it influences rates for mortgages, auto loans, credit cards, and more.

Fed lowers rates by 25 basis points

In its press release, the FOMC said it decided to lower the rate, as conditions are in line with its goals with the economy expanding, labor market conditions easing, and inflation dropping.

Specifically, the economy grew at a 2.8% clip in Q3, while inflation as measured by Personal Consumption Expenditures (PCE) fell to 2.1% in September, nearly at the Fed’s 2% goal. The unemployment remained at 4.1% in October.

“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” FOMC officials said in a statement.

In assessing future moves, the committee said it will continue to monitor incoming information and is prepared to adjust its stance if risks emerge that could impede the attainment of the committee’s goals.

“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,” the release said.

Election: No near-term effect on policy decisions

In the press conference that followed, Fed Chair Jerome Powell said he thinks the economy and the Fed’s policy are in a “very good place,” adding that it is “remarkable how well the economy has performed” compared to the other nations.

“We’re on a path to a more neutral stance,” Powell said, and that the way to get there is “carefully, patiently.”

When asked what impact the new Trump Administration might have on the FOMC and monetary policy, Powell said it wouldn’t, at least not now.

“In the near term, the election will have no effect on our policy decisions,” he said.

That would only change based on what the Trump Administration’s policy proposals are, and if they are passed. Powell said only then will the FOMC figure them into their models and assess the data for potential impact, like it always does.

“We don’t guess, we don’t speculate, we don’t assume,” Powell said.

Powell was also questioned on if he would resign, if he was asked to by the newly elected president.

“No,” was Powell’s one word answer, confirming in response to a follow up that he is legally not required to leave until his term is up in May 2026.

Powell also said in response to another question about whether or not he or other Fed governors could be fired or demoted, Powell said, “not permitted under the law.”

The next FOMC meeting is December 17 and 18.