The Federal Reserve announced its third straight interest rate cut for 2024 on Wednesday, lowering its benchmark rate by 0.25 percentage points amid slowing inflation. The central bank has cut rates by one percentage point since September, providing relief to Americans with credit card balances and other debt.
The Fed lowered the federal funds rate — the interest rates banks charge each other for short-term loans — to a range of 4.25% to 4.5%, down from its previous target range from 4.5% to 4.75%. The move comes after policymakers reduced the rates of 0.5 percentage points in Septemberfollowed by a Drop of 0.25 percentage points in November.
Wednesday’s decision marks the Fed’s final interest rate decision before President-elect Donald Trump’s inauguration on January 20. While price increases have eased from their peak in June 2022, opening the door to Fed rate cuts this year, inflation has remained stable and well above the 2% annual target. the Fed.
Consumer prices increased in November 2.7% on an annual basisfueled by high housing and food costs. Given this stubborn inflation, many analysts believe the Fed will likely make fewer rate cuts in 2025, fearing the economy will overheat.
At the same time, the Fed has so far defied forecasters’ warnings that its rate hikes could trigger a recession.
“Even though the Fed’s 2% inflation target has proven elusive thus far, it has managed to bring inflation down from its peaks without derailing an economy that continues to purr,” noted Joe Gaffoglio, CEO of Mutual of America Capital Management, in a statement. email before the Fed announcement. “However, if inflation continues to remain above target in the new year, markets may be overly optimistic about the number of cuts the Fed may impose.”
The Fed’s first rate meeting of 2025 is scheduled for January 28-29, after Trump’s inauguration. About eight in 10 economists expect the Fed to keep rates steady at this meeting, according to financial data firm FactSet.
—This is a developing story and will be updated.
