Post-Election Fed Meeting Results in 25-Basis-Point Rate Cut
On November 7, 2024, the Federal Reserve announced its second rate cut of the cycle. As a result, reducing rates by 25 basis points from 4.75%-5.00% to 4.50%-4.75%. This follows the committee’s decision to lower the overnight rate by 50 basis points in September. The impact of the cut was felt immediately in the 10-year Treasury yield. Long-term yields, which had risen sharply on Wednesday, November 6—largely due to increased economic confidence following Trump’s election victory—fell swiftly after the Fed’s action. Long-term yields closed Thursday at 4.3%, nearly identical to where they were at the start of election week.
Impact of the Fed’s Second Rate Cut of the Cycle
While Treasury yields and borrowing costs haven’t fallen as quickly as investors might hope, even two cuts into the current rate cycle, it isn’t surprising they’ve remained elevated given economic and political conditions. U.S. consumers and businesses now feel more confident about the country’s economic future and are adjusting their financial strategies accordingly. This affects bond yields because when investors withdraw funds from safer assets like bonds and Treasuries, yields for these assets rise. In the near term, the 10-year Treasury rate it likely to remain higher than the overnight rate set by the Fed. However, over the long run, the Fed’s rate cuts should gradually place downward pressure on borrowing costs.
Looking ahead, the Fed is confident that inflation is moving toward the 2% target. Now, it is prioritizing the other side of its dual mandate: maintaining full employment. As a result, investors may find it more useful to monitor the unemployment rate and job growth, rather than CPI or PCE data, to anticipate the Fed’s next moves. This is good news for commercial real estate (CRE) investors and markets. If the economy continues to grow and businesses expand job numbers, rates may stay elevated for longer, which would also support property performance. Conversely, if the economy weakens, borrowing costs could fall more swiftly.
Current Wall Street estimates suggest we may see another 25-basis-point cut in December. However, some experts expect rate cuts at every other Fed meeting in the coming months. By the end of 2025, most investors anticipate the overnight rate will range between 3.50% and 4.25%
