Federal Reserve Announces Third Consecutive Rate Cut, Indicates Slower Pace for 2025
The Federal Reserve has declared its third consecutive interest rate cut of 2024 on December 18, reducing the benchmark federal funds rate by 0.25 percentage points to a range of 4.25% to 4.5%. However, the central bank also signaled a more cautious approach for 2025, projecting only two rate cuts next year compared to the four previously forecasted in September.
Fed Chair Jerome Powell acknowledged that inflation progress has been “slower than expected,” with consumer prices rising 2.7% annually in November, still above the Fed’s 2% target. The decision comes amid a resilient U.S. economy that has avoided recession despite earlier warnings. Powell noted that while downside risks to the labor market have diminished, housing services inflation continues to fall at a slower pace than hoped.
Markets responded negatively to the announcement, with the S&P 500 dropping over 1.7% and the Dow falling more than 1.4% in the final hour of trading. Cleveland Fed President Beth Hammack was the sole dissenter, preferring to keep rates unchanged. The Fed’s next meeting is scheduled for January 28-29, with about 80% of economists expecting rates to remain steady at that time.
Source: Federal Reserve Press Release