The Federal Reserve lowered its key interest rate by a quarter percentage point, marking the third consecutive reduction. However, the Fed expressed caution regarding future rate cuts.
WASHINGTON – The Federal Reserve on Wednesday lowered its key interest rate by a quarter percentage point, the third consecutive reduction and one that came with a cautionary tone about additional reductions in coming years. In a move widely anticipated by markets, the Federal Open Market Committee cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022 when rates were on the move higher.
Though there was little intrigue over the decision itself, the main question had been over what the Fed would signal about its future intentions as inflation holds steadily above target and economic growth is fairly solid, conditions that don't normally coincide with policy easing. In delivering the 25 basis point cut, the Fed indicated that it probably would only lower twice more in 2025, according to the closely watched 'dot plot' matrix of individual members' future rate expectations. The two cuts indicated slice in half the committee's intentions when the plot was last updated in September. Assuming quarter-point increments, officials indicated two more cuts in 2026 and another in 2027. Over the longer term, the committee sees the 'neutral' funds rate at 3%, 0.1 percentage point higher than the September update as the level has drifted gradually higher this year. For the second consecutive meeting, one FOMC member dissented: Cleveland Fed President Beth Hammack wanted the Fed to maintain the previous rate. Governor Michelle Bowman voted no in November, the first time a governor voted against a rate decision since 2005. The fed funds rate sets what banks charge each other for overnight lending but also influences a variety of consumer debt such as auto loans, credit cards and mortgages. The post-meeting statement changed little except for a tweak regarding the 'extent and timing' of further rate changes, a slight language change from the November meetin
FEDERAL RESERVE INTEREST RATE INFLATION ECONOMIC GROWTH MONETARY POLICY
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