The Federal Reserve will cut interest rates for a third consecutive time, according to a Fed statement today. The move signals a winning battle in the United States against inflation heading into a new presidential administration.
The total cut is 25 base points and follows a 25 bps cut in November 2024. This past September marked the first interest rate cut in nearly four years. Since the pandemic, the US struggled with inflation, hiking rates for many months straight.
The decision officially brings the federal funds rate down to 4.25 from 4.50%. The Federal Reserve has seen inflation steady at just above its target. However, it is down considerably from the 40-year high it reached during the height of the pandemic. Although this most recent interest rate cut will not be immediately felt, it is an important part of what should be an ongoing trend of slashing rates for the central bank.
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Moreover, the Fed’s effort to cut interest rates is expected by many to continue into 2025. There certainly shouldn’t be anything standing in the Central Bank’s way. During a speech in Jackson Hole, Wyoming earlier this year, Fed Chair Jerome Powell expressed confidence that inflation had been overcome. With this battle reportedly over in the Fed’s eyes, the reversal of steep interest rates can finally take place over the next several months.
Experts believe that there will be two rate cuts in 2025, down from the six expected, and three actual cuts in 2024. Next year, the market is going right the way over to the left-hand side,” says Bloomberg market analyst Manus Cranny. “And it’s a hawkish cut, probably two cuts next year is what the market says.”
