Central bank slashes rates for the third meeting in a row
The Federal Reserve has lowered its funds rate by 25 basis points, rounding off the year with its third consecutive cut.
The central bank said after its last meeting of 2024 that it had reduced its trendsetting interest rate to a range between 4.25% and 4.5%, meaning rates have seen a 150-basis-point dip since September.
The move comes as no surprise to markets, which had fully priced in a 0.25% cut despite a slight uptick in inflation in November and continuing signs of a resilient labor market.
Traders expected a quarter-point cut to end the year before a possible pivot by the Fed to a more cautious approach in 2025 – one that could see as few as one or two rate reductions in the 12 months ahead.
With the US economy adding 227,000 jobs in November and inflation inching upwards to 2.7%, ClearBridge Investments strategy analyst Josh Jamner told Mortgage Professional America further signs of jobs market strength and upward pressure on inflation would likely see the Fed scale back its plans for further cuts next year.
In September, the Fed made its first interest rate cut since the beginning of the COVID-19 pandemic, trimming its funds rate with a jumbo 50-basis-point drop and following that with a quarter-point reduction in November.
Today’s decision marks its final announcement before the inauguration of Donald Trump as president in January, with plenty of speculation over how some of the incoming administration’s policy proposals could impact inflation and the overall economic outlook.
The Fed’s first decision on interest rates of 2025 will arrive on January 28-29 – just over a week after Trump takes office for a second time on January 20.
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