Federal Funds Rate to be Cut?
During his testimony to Congress on July 10, 2019, Federal Reserve Chairman Jerome Powell gave indications of a potential federal funds rate cut. Powell stated that while the economy continues to perform "reasonably well," "inflation has been running below the Federal Open Market Committee's symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook".
The federal funds' benchmark rate is currently at 2.35%. The Federal Reserve is expected to lower the rate to about 2.1% by the end of July. The next Federal Open Market Committee (FOMC) meeting is scheduled for July 30-31. Additional rate cuts are anticipated by many. James Bullard, President of the St. Louis Federal Reserve, recently stated he sees a 25 basis point cut at the next FOMC meeting and another 25 basis point cut by the end of the year.
Community banks should continue to monitor forecasted future rates and their interest rate risk models to estimate the impact rate changes will have on their institution's profitability.