Fed likely to cut interest rates by another 0.25 percentage points

Investors are betting heavily on the Fed to cut its benchmark interest rate by 0.25 percentage points on November 7, following its two-day meeting starting on November 6.

The US economy continues to be a bright spot in the global landscape, with inflation falling back toward the Fed’s 2% target, while economic growth remains solid and the labor market is improving. Against this backdrop, futures traders are pricing in a more than 99% chance of a Fed rate cut.

Many analysts agree with market expectations for a 25 basis point cut, which would take the Fed's key lending rate to a target range of 4.5% to 4.75% - 75 basis points lower than where it was in early September.

Texas A&M University finance professor Jill Cetina predicts the Fed will cut interest rates by 0.25 percentage points, a prediction also made by economists at Goldman Sachs.

The US central bank is given two main responsibilities by Congress: to act independently to maintain inflation at 2% over the long term and to keep unemployment at the lowest possible but sustainable level. Under this mandate, the Fed conducts monetary policy by adjusting benchmark interest rates to manage the economy. Meanwhile, Congress and the White House are responsible for budget and government spending issues.

During the campaign, Republican presidential candidate Donald Trump said that if elected, he would have the right to suggest what the Fed should do about interest rates. Democratic presidential candidate Kamala Harris, on the other hand, has said that she “would never interfere” with the Fed’s decisions. However, any changes to the Fed’s independence would still require congressional approval.