- US Federal Reserve cuts interest rates by 25 basis points to 4.25%-4.50%.
- Chairman Jerome Powell reassures that the US economy remains strong despite inflation concerns.
- The Dow Jones and Nasdaq saw slight declines, while the US Dollar Index increased.
- The Fed projects two more interest rate cuts in 2025 amid rising inflation.
- The Fed will continue monitoring inflation and labor market conditions closely.
The US Federal Reserve made a significant announcement on December 18, 2024, reducing its key interest rates by 25 basis points to a new target range of 4.25% to 4.50%. This decision followed the conclusion of the two-day Federal Open Market Committee (FOMC) meeting.
Fed Chairman Jerome Powell’s Statement During a press briefing post-policy announcement, Federal Reserve Chairman Jerome Powell highlighted the overall strength of the US economy. He said, “The US is strong overall. The unemployment rate forecast is 4.2 per cent this year, and 4.3 per cent over the next few years. Inflation has eased significantly over the past two years but remains somewhat elevated relative to our 2 per cent longer run goal.”
Market Reactions Following the rate cut, US stock markets saw a slight decline. The Dow Jones fell by 0.25%, while the Nasdaq dropped 0.56%. On the other hand, the US Dollar Index saw a marginal rise of 0.05%, reaching 107.0050.
Before the announcement, markets were trading in the green, with the Dow Jones up by 0.35% and the Nasdaq up by 0.25%.
Recent Rate Cuts by the Fed This latest rate cut is the third in a row by the Federal Reserve over the past three months. The first reduction, by 50 basis points, happened in September, followed by a 25 basis point cut in November. With this new cut, the rate now stands at 4.25% to 4.50%. It’s worth noting that the first cut in this cycle was the first in four years.
Economic Projections In its statement, the FOMC mentioned that recent indicators point to solid economic growth. The labor market has eased somewhat, with the unemployment rate rising but still remaining low. Inflation has made progress toward the Fed’s 2% target, but it continues to remain elevated.
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The FOMC also updated its economic forecasts. The US Fed reduced its unemployment projections for 2025 but raised its inflation forecast to 2.5% for that year, up from 2.1% previously.
Fed projections suggest two more quarter-point rate cuts next year, amid rising inflation concerns.
Live Broadcast of the Meeting The post-meeting press conference can be watched live on the Federal Reserve’s official website at federalreserve.gov/live-broadcast.htm. It will also be available on the Fed’s YouTube channel and other social media platforms.
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