What happened last week…
The Federal Open Market Committee (FOMC) lowered interest rates by 25 basis points, as expected, to a new range of 4.25% to 4.50%. It was the third consecutive rate cut in what was the final FOMC meeting for the year. Federal Reserve Chairman Jerome Powell said, “With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate.”
In 2025, the Federal Reserve forecasts two quarter-point rate reductions, less than the previously projected four quarter-point rate reductions. Out of the 19 Fed officials, 14 have favored the double cut while the other five members foresee more than two cuts as necessary. The stock market reacted poorly to the updated forecast with the three major indices’ performances on that day as follows: DJIA (-2.58%), S&P 500 (-2.95%), NASDAQ (-3.56%). Although the week finished in negative territory, the indices ended Friday’s trading session with notable gains: DJIA (1.18%), S&P 500 (1.09%), NASDAQ (1.03%).
The Fed also updated its economic projections. For 2024, change in real GDP is expected to be 2.5% (up from 2.0% in September), the unemployment rate is expected to be 4.2% (down from 4.4%), PCE inflation is expected to be 2.4% (up from 2.3%), and core PCE inflation is expected to be 2.8% (up from 2.6%). For 2025, projections foresee change in real GDP of 2.1%, an unemployment rate of 4.3%, PCE inflation of 2.5%, and core PCE inflation of 2.5%.
The GDP growth rate (final estimate) for Q3 2024 beat expectations (2.8%) as it increased to 3.1%, besting the second estimate of 2.8% and higher than the Q2 2024 rate of 3.0%. It is the best quarterly reading of the year. The Q1 2024 rate of 1.6% was the lowest growth since the Covid pandemic.
Existing home sales for November beat expectations (4.07 million) as it increased to 4.15 million from 3.96 million. It is the highest reading in eight months.
This week…
On Tuesday, new home sales for November are expected to increase to 650,000 from 610,000, which was the lowest figure since October 2022 as mortgage rates increased and two hurricanes impacted sales.
On Tuesday, the stock market will close early at 1:00 PM EST.
On Wednesday, the stock market will be closed in observance of Christmas Day.
Thanks for Reading!
- The Rockline Team
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