The Federal Reserve is expected to announce a quarter-point cut to its benchmark interest rate on Wednesday, but may signal a slowdown in future reductions.
Federal Reserve officials on Wednesday will likely signal a slower pace of interest rate cuts next year compared with the past few months. This would mean that Americans might enjoy only slight relief from still-high borrowing costs for mortgages, auto loans, and credit cards. The Fed is set to announce a quarter-point cut to its benchmark rate, from about 4.6% to roughly 4.3%.
The latest move would follow a larger-than-usual half-point rate cut in September and a quarter-point reduction in November. Wednesday's meeting, though, could mark a shift to a new phase in the Fed's policies: Instead of a rate cut at each meeting, the Fed is more likely to cut at every other meeting — at most. The central bank's policymakers may signal that they expect to reduce their key rate just two or three times in 2025, rather than the four rate cuts they had envisioned three months ago. So far, the Fed has explained its moves by describing them as a 'recalibration' of the ultra-high rates that were intended to tame inflation, which reached a four-decade high in 2022. With inflation now much lower — at 2.3% in October, according to the Fed's preferred gauge, down from a peak of 7.2% in June 2022 — many Fed officials argue that interest rates don't need to be so high. But inflation has remained stuck above the Fed's 2% target in recent months while the economy has continued to grow briskly. On Tuesday, the government's monthly report on retail sales showed that Americans, particularly those with higher incomes, are still willing to spend freely. To some analysts, those trends raise the risk that further rate cuts could deliver an excessively strong boost to the economy and, in doing so, keep inflation elevated
FEDERAL RESERVE INTEREST RATES INFLATION ECONOMY RETAIL SALES
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