Growth has been resilient, but inflation is cooling. The combination makes it hard to guess how much policymakers will lower rates.

Jerome Powell speaking behind a lectern, with an American flag behind him. He is wearing glasses, a suit and a purple tie.
Jerome Powell, the Federal Reserve chair. Fed officials cut interest rates in September for the first time in four years.

Credit…Pete Marovich for The New York Times

By Jeanna Smialek

Nov. 1, 2024

Federal Reserve officials cut interest rates in September for the first time in four years, but now investors are beginning to ask the natural next question: How much will they lower them in the months and years to come?

Deciding the answer could be complicated, as job market data on Friday will most likely underscore.

The Fed has two official goals: Central bankers are supposed to control inflation and maintain a strong labor market. That means that when inflation is rapid, as it was from 2021 to 2023, officials lift interest rates to slow the economy and wrestle it down. And when inflation cools, as it has been recently, policymakers lower interest rates to make sure that they do not cool growth so much that they risk serious damage to hiring conditions.

Because price increases have slowed and unemployment has ticked up over the past year, the Fed lowered interest rates by half a percentage point in September. Officials are widely expected to follow that up with a quarter-point rate cut at their meeting on Nov. 7.

What happens after that is less certain, many economists said.

Fed officials have forecast two more quarter-point rate cuts before the end of the year, which would most likely mean one in November and one in December. They have also forecast further rate cuts in 2025. But U.S. growth has been strong in recent months, and consumers are spending at a robust clip. Such resilience could call into question whether rates need to come down so much and so quickly.

That’s where Friday’s job data could come into play. If the job market looks like it is stabilizing, it would add to the case that the central bank could take its time lowering interest rates. If the job market is cooling substantially, then Fed officials may feel more inclined to keep steadily cutting them beyond November.

But the latest data may do little to clear up the picture if they seem to be muddled by the storms and strikes in October, as many economists expect.

That is why Fed officials are probably also looking at a variety of other economic measures — including weekly jobless claims, wage data and anecdotal reports — as they try to assess the current state of the economy.

“We still have a cut in November,” said Diane Swonk, the chief economist at KPMG. “December is more up in the air, obviously.”

She said rates seemed unlikely to return to the near-zero interest rates that prevailed in 2020 and for parts of the 2010s.

“The ultra-low interest rate environment was an anomaly,” she said.

Jeanna Smialek covers the Federal Reserve and the economy for The Times from Washington. More about Jeanna Smialek

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