The United States Federal Reserve (Fed) delivered another 25-basis-point rate cut at its October meeting yesterday, lowering interest rates to between 3.75% and 4.00%. The decision marks a total of 150 basis points of rate cuts since the beginning of the central bank's easing cycle in September 2024, bringing US interest rates to their lowest level since 2022.

Ten of the twelve members of the Federal Open Market Committee (FOMC) voted in favour of the move. One member preferred to hold rates steady. The final member, Stephen I. Miran, voted for a deeper 50-basis-point cut. Miran was nominated by President Donald Trump to replace Adriana Kugle, who resigned as a member of the committee in August.

The FOMC reiterated that its goal remains to balance its dual mandate of promoting maximum employment and price stability amid persistent uncertainty. The committee stated that: "available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments." It further said that: "inflation has moved up since earlier in the year and remains somewhat elevated."

The market reaction to the rate cut was muted, with equities climbing modestly, as traders had already priced in the likelihood of a cut. Over the past week, the S&P 500 gained 2.9%, and the Dow Jones rose 2.7%. Also over the past week, the rand appreciated by 1.2% against the dollar, trading near R17.20 last night. The market's anticipation of a US rate cut weakened demand for the dollar, leading to this stronger rand.

For South Africa, the Fed’s decision creates room for a 25-basis-point rate cut by the SARB at its final meeting of 2025, scheduled for 20 November.