Fed Cuts Interest Rates but Signals Slowing of Cuts

New York, NY, December 19, 2024-"The Federal Reserve signaled greater doubt over how much it would continue to cut interest rates after agreeing to a reduction on Wednesday that Chair Jerome Powell conceded had been a close call,” reports the Wall Street Journal.

The central bank lowered its benchmark interest rate by a quarter percentage point to a range of 4.25% to 4.5%.

“‘Today was a closer call, but we decided it was the right call,’ Powell said at a news conference after the meeting. He later added, ‘From here, it’s a new phase, and we’re going to be cautious about further cuts.’

“New projections released Wednesday show Fed officials expect inflation to be stickier next year than previously anticipated, possibly because of policy changes by President-elect Donald Trump. The projections show officials expect to make fewer rate reductions, with most penciling in two cuts for 2025, down from four at their meeting in September.

“Officials have been trying to pull off a balancing act. They want to prevent the aggressive rate increases of the past two years from unnecessarily slowing down economic activity now that price and wage growth has cooled, but they don’t want to undo recent progress on inflation.

“‘They’re in a tough spot where it feels like there is no right answer. It is a difficult time to be making policy,’ said Michael de Pass, global head of rates trading at Citadel Securities. ‘There is an inconsistency’ in cutting rates while anticipating firmer inflation ‘that is difficult to square,’ he said.”