The cut interest rates by a quarter point, but also signaled a slower pace of cuts ahead.
According to a Fed statement, policymakers voted 11 to 1 to lower the US central bank’s key lending rate to between 4.25 and 4.5%.
“Economic activity has continued to expand at a solid pace” with an unemployment rate that “remains low” and inflation that “remains somewhat elevated,” the central bank’s rate-setting Federal Open Market Committee said in its latest policystatement.
The sole holdout was Cleveland Fed President Beth Hammack, who supported keeping rates where they were.
Slower pace of cuts likely in 2025
Members of the Fed’s rate-setting committee penciled in just two quarter-point rate cuts in 2025, down from an earlier prediction of four, and hiked their inflation outlook for next year from 2.1% to 2.5%.
This could also be partly connected to uncertainty about potential policy changes after Donald Trump’s second term begins.
Wednesday’s rates decision was the last planned one under Joe Biden before Trump’s inuaguration next month.
Some of Trump’s policy proposals, not least his calls for tariffs in global trade, could prove inflationary.
Fed officials have said that currently, it is difficult to predict the impact of Trump returning to the White House, as it’s not yet possible to discern what plans he actually intends to pursue, or in what exact manner.
The dollar rose against several other currencies on the back of Wednesday’s news, but stock markets faltered, with investors seemingly disappointed by the more cautious anciticipated plan of action for 2025.
As of 3:30 p.m. on Wall Street, the three main US indices were all down by 1.38%, in the case of the Dow Jones, or more.
ft/msh (AFP, AP, Reuters)
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