The Federal Reserve lowered interest rates for the third time this year, aiming to stimulate the economy and curb inflation. The rate cut, which brings the target range to 4.25% to 4.50%, follows previous reductions in September and October. Federal Reserve Chair Jerome Powell expects inflation to continue declining towards the 2% target, although the path may be uneven. While the rate cut could lead to lower borrowing costs for some, borrowers with adjustable rates may still see increases depending on market conditions.
The rate was lowered by 25 basis points to a target range of 4.25% to 4.50% — a full 1% drop since September. The federal funds rate influences borrowing costs for credit cards, loans, auto financing and, more indirectly, mortgages.year-over-year rate of 9.1%, Fed Chair Jerome Powell expects it to"continue to come down toward our 2% objective, albeit on a sometimes bumpy path," he said in a November speech.
The Fed also updated its projections, with the benchmark rate expected to reach a range of 3.75% to 4% by the end of 2025. However,"if the proposed Trump tax cuts and increased tariffs serve to exacerbate inflation, the Fed would likely change course and exercise more caution," says Robert Johnson, professor of finance at Creighton University's Heider College of Business.
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