Federal Reserve Announces Third Interest Rate Cut of 2024, Yet Hints at a Slowdown
The Federal Reserve announced its third interest rate cut of 2024 on Wednesday, December 11, lowering the federal funds rate by 25 basis points to a range of 3.5%-3.75%. Despite this, the central bank adopted a more hawkish tone, signaling a potential pause in future rate cuts that tempered initial market enthusiasm.
The decision, however, was not unanimous. Three Federal Open Market Committee members dissented – the most opposition since September 2019. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid favored holding steady, while Governor Stephen Miran advocated for a half-point cut. Fed Chair Jerome Powell indicated that policymakers project only one additional rate cut in 2026.
Despite the mixed signals, major stock indices reached new records following the announcement. The S&P 500 hit 6,900 for the first time, while the Dow Jones Industrial Average gained over 650 points. The Fed’s statement notably mentioned an uptick in unemployment, suggesting increased attention to labor market conditions alongside inflation concerns.
Market participants had widely anticipated the quarter-point reduction, with CME FedWatch showing a 98.4% probability of the cut before the announcement. The Fed’s cautious approach reflects concerns about maintaining economic stability while managing inflationary pressures.
Source: Yahoo Finance