Federal Reserve Announces Third Consecutive Rate Cut, Yet Indicates Slower Pace in 2025
The Federal Reserve announced its third consecutive interest rate cut on Wednesday, reducing the federal funds rate by 25 basis points to a range of 4.25%-4.5%. However, the central bank signaled a more cautious approach for 2025, projecting only two rate cuts next year compared to the four previously forecast.
Fed Chair Jerome Powell stated that the central bank would be “more cautious as we consider further adjustments,” citing progress made since rates peaked. Markets reacted negatively to the hawkish tone, with the Dow Jones falling over 1,100 points and the S&P 500 dropping nearly 3%.
The probability of a December rate cut had risen to 96.4% before the meeting, up from 66% at the beginning of the previous week.
- The Fed raised its inflation projections for next year by 40 basis points to 2.5%.
- It also increased GDP growth forecasts to 2.5% for 2024.
Source: CNBC
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