Next week will be a big week for the economy, long-term and short-term.
Americans will go to the polls next week to decide the next president and the Federal Open Market Committee will meet to decide on additional cuts to the federal target interest rate.
The General Election is Nov. 5 and voting is underway throughout the country in the presidential race along with several pivotal House and Senate contests.
The FOMC in September announced a half-point percentage cut, the first rate cut since 2020. The new target rate is now from 4.75 to 5 percent.
“The Federal Open Market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by a 1/2 percentage point,” said Federal Reserve Chairman Jerome Powell. “This decision reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2 percent.”
The cut in rates followed the Federal Reserve holding rates steady for nine straight meetings since mid-2023. The Federal Reserve raised rates by 525 basis points from early 2022 through last summer in an effort to bring down inflation.
It was the first in what is expected to be a series of cuts. In September, committee members predicted rates to be at 4.4 percent at the end of the year and down to 3.4 percent by the end of 2025.
Since September, the consumer price index report released in October showed inflation continuing to fall. The annual inflation rate at the end of September was at 2.4 percent, according to the Bureau of Labor Statistics. That was down from the 2.5 percent rate at the end of July.
The labor market stayed strong, with unemployment at 4.1 percent and the economy adding 254,000 jobs.
The federal interest rate cut has yet to filter down to used vehicle financing. According to new numbers from Cox Automotive, used vehicle rates are at 13.9 percent. Rates peaked in February at 14.59 percent.
“Despite the limited decline so far, September and October are the first months in two and half years with rates being down on a year-over-year basis,” said Cox Automotive Chief Economist Jonathan Smoke.
