The Federal Reserve The central bank is expected to announce its next policy move on interest rates on Thursday following the election and after a flurry of economic data.

Policymakers on the Federal Open Market Committee (FOMC) are expected to announce a 25 basis point cut, cutting the federal funds rate to a range of 4.5% to 4.75%, down from 4.75 previously % to 5%.

The expected cut follows a larger-than-usual 50 basis point cut in September. This was the first rate cut in four years after inflation rose to a 40-year high as a result of pandemic-related supply chain disruptions and an influx of federal spending on relief measures and other initiatives.

Fed Chairman Jerome Powell Following the Fed's announcement, he is expected to hold a news conference where he will answer questions about the central bank's plans for rate cuts or pauses at upcoming meetings.

The Federal Reserve's preferred inflation indicator showed price growth slowing further in September

Federal Reserve Chairman Jerome Powell and the FOMC are expected to announce a 25 basis point rate cut on Thursday. (Seth Herald/Bloomberg via Getty Images / Getty Images)

The Fed's policy meeting comes as inflation continues to show signs of cooling, although prices remain stubbornly high. This also came after a weaker-than-expected jobs report raised concerns about the health of the labor market.

Last week, the Commerce Department released data showing that the The Fed's preferred inflation indicator – the personal consumption expenditures (PCE) index – rose 2.1% year-on-year in September. That was down slightly from 2.3% in August as the pace of price growth continued to slow. The Federal Reserve is focusing on the headline PCE number as it tries to bring inflation back to its 2% target. Core PCE, which excludes volatile food and energy prices and is considered a better indicator of inflation, rose 2.7%, little changed from the previous month.

The Ministry of Labor Job report October showed the U.S. economy added just 12,000 jobs, far below the 113,000 gain forecast by LSEG economists. That was the lowest monthly employment figure since December 2020 – although a strike by 33,000 union machinists at Boeing and economic dislocation from Hurricanes Helene and Milton contributed to the smaller-than-expected job gain.

The US economy created 12,000 new jobs in October, well below economists' expectations

Market expectations of a 25 basis point interest rate cut on Thursday remained unchanged President-elect Trump's victory to Vice President Harris, although they have shifted slightly ahead of the Fed meetings in the coming months.

The probability that the Fed will make another 25 basis point rate cut in December, to a range of 4.25% to 4.5%, decreased slightly to 67.2% from 77.3% on Wednesday following the electionAccording to CME FedWatch, the chance of the Fed keeping interest rates stable rose from 22% to 31.2%.

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Powell could provide insight into the Fed's thinking on interest rates in the coming months. (Photographer: Ting Shen/Bloomberg via Getty Images / Getty Images)

“We believe the most important things going into the December FOMC meeting will be the two CPIs and the only jobs report until then,” Michael Feroli, chief U.S. economist at JP Morgan, wrote in an analyst note. “Ultimately, the election results may have slightly reduced the likelihood of a cut, as the appreciation of risk assets could be a factor in the discussion.”

“After December, we now see Fed easing at a quarterly pace, with the next easing in March and continuing until the key rate reaches 3.5%,” Feroli wrote.

Uncertainty over the Fed's rate-cutting plans in 2025 is reflected in CME FedWatch probabilities for the January meeting. The market expects rates to have a 53% chance of hitting 4.25% to 4.5%, which would represent a 25 basis point cut following a cut of the same amount this month. That's up from a 47% chance on Election Day.

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After the election, the probability of a more aggressive rate cut in January fell to a range of 4% to 4.25% from 41% to 26.9%, while the probability of the Fed cutting rates at 4.5% to 4.75% left, rose from 10.6% to 19.2% after the election.

The Fed is scheduled to hold its next meeting political meeting on December 17 and 18, while the January session is scheduled for January 28-29.