By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – Federal funds rate futures, which measure the cost of unsecured overnight lending between banks, priced in another 25 basis point rate cut next month on Thursday after the Federal Reserve cut rates by the same amount at the end of the two-day policy meeting.
Interest rate futures also implied another 67 basis points of cuts by 2025, LSEG calculations showed.
The central bank’s rate-setting Federal Open Market Committee cut the overnight rate to the range of 4.50%-4.75%, as widely expected. The decision was unanimous.
The statement also noted that economic growth remains solid while inflation continues to move toward the Fed’s 2% target.
“Today’s rate cut indicates that the Fed continues to see positive signals when it comes to inflation and the broader economy after the last rate cut,” said Michele Raneri, vice president and head of U.S. research and advisory at TransUnion in Chicago.
“Further cuts are expected to occur as we move into 2025. The hope is that this will continue to stimulate consumer activity in the credit market, especially as we look at credit products that have been sluggish in recent quarters.”
The Fed Fund Futures assume a 72% probability that the Fed will cut rates at its policy meeting next month.
(Reporting by Gertrude Chavez-Dreyfuss; additional reporting by Saeed Azhar; Editing by Chris Reese and Paul Simao)
