Federal Reserve cuts interest rates by 0.25 percentage points, its third reduction this year
Federal Reserve Wednesday Announce The third consecutive interest rate cut will be in 2024, lowering the benchmark interest rate by 0.25 percentage points amid cooling inflation. The central bank has now cut interest rates by 1 percentage point since September, providing relief to Americans holding credit card balances and other debt.
The Fed lowered the federal funds rate, the rate banks charge each other for short-term loans, to 4.25% to 4.5%, below its previous target range of 4.5% to 4.75%. The decision comes after policymakers slashed interest rates Increased 0.5 percentage points in Septemberfollowed by a down 0.25 percentage points November.
Meanwhile, the Fed now expects just two interest rate cuts in 2025, down from the four it predicted when it last released its economic forecasts in September. The central bank now expects the federal funds rate may reach a mid-level of 3.9% by the end of 2025, up from its previous forecast of 3.4%.
Whitney Watson, global co-head of fixed income and bonds and co-chief investment officer, said: “While the Fed chose to end the year with a third consecutive rate cut, its New Year’s resolution appears to be to pursue a more gradual pace of easing. .” Liquidity Solutions from Goldman Sachs Asset Management, in an email. “We expect the Fed to choose to skip a rate cut in January and then resume its easing cycle in March.”
Wednesday’s move marks the Fed’s final interest rate decision before President-elect Donald Trump takes office on January 20. Although price increases have cooled from their peak in June 2022, opening the door for the Federal Reserve to cut interest rates this year, inflation remains sticky and well above the Fed’s 2% annual target.
Consumer prices rise in November 2.7% per yeardriven by rising housing and food costs. Given stubborn inflation, many analysts believe the Fed may cut interest rates less in 2025 due to concerns it could overheat the economy.
Still, the Fed has so far ignored forecasters’ warnings that raising interest rates could trigger a recession.
The Fed’s first interest rate meeting in 2025 is scheduled to be held on January 28-29, after Trump takes office. About 8 in 10 economists expect the Fed to keep interest rates steady at this meeting, according to financial data firm FactSet.
–This is a developing story and will be updated.
