Federal Reserve cut rates by a quarter percent on Wednesdayas widely expected, but set a cautious course for lower interest rates in 2025.
The Federal Open Market Committee voted to cut the federal funds rate to a target range of 4.25%, the committee's third rate cut since September summary of economic forecasts forecast that rates would fall by just half a percentage point in 2025. After the September meeting, the committee had projected a full percentage point cut for next year.
Fed Chairman Jerome Powell stated that the main reason for the withdrawal of the committee is the slower-than-expected progress in the fight against inflation this year.
"The single biggest factor is that inflation has come down again compared to expectations," Powell said at a post-meeting news conference.
The Fed began raising interest rates in the spring of 2022 to combat rising inflation, leaving rates at historic highs for nearly a year, making borrowing and financing more expensive for both consumers and businesses.
High inflation means you pay more for everything, including food and housing.High interest rates make it difficult to get loans or credit.
Setting monetary policy is a delicate balancing act that requires taking into account inflation and the labor market.One of the risks the Fed has faced in keeping interest rates high is slowing the economy too much, as evidenced by rising unemployment.
Inflation rates have risen slightly since September and are well above the central bank's 2% target if the economy warms up again, especially given the country's potential inflationary pressures the economic policies of the next administrationThe Fed could try to hit the brakes by reducing the number of rate cuts further next year or even potentially raising rates again.
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