Posted on 12/18/24
| News Source: Yahoo Finance
The Federal Reserve reduced interest rates by a quarter percentage point Wednesday and scaled back the number of cuts it expects to make next year.
In a split vote, the central bank voted to reduce its benchmark interest rate by 25 basis points to a new range of 4.25%-4.5%, initiating its third consecutive rate cut of 2024 despite signs that inflation isn’t entirely going away.
Newly appointed Cleveland Fed president Beth Hammack objected, preferring not to cut rates. Her dissent marked the second against a policy decision since the Fed started its latest rate-cutting cycle in September.
The consensus among Fed officials is for two rate cuts next year, down from four previously forecast in September.
Ten officials estimated 2 cuts next year, three saw two cuts next year, three saw 4, and one saw no cuts.
"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” officials from the Fed's Federal Open Market Committee said in a statement.
The statement added in the phrase "extent and timing" to indicate that the Fed may not continue its current trend of consecutive meeting cuts and may slow its pace of monetary policy easing.
The so-called neutral rate — the rate on the Fed’s benchmark policy rate designed to neither boost nor slow economic growth — is now also viewed by Fed officials as being slightly higher, ending at 3%, up from 2.9%.