On December 18, 2024, the Federal Reserve cut its key interest rate by 0.25%, setting the new range at 4.25% to 4.5%. This is the third rate cut of 2024, following similar moves in September and November. The Fed's decision reflects ongoing efforts to balance economic growth with inflation control.
The Fed also updated its economic projections. It expects U.S. GDP growth of 2.5% for 2024 and 2.1% for 2025. Inflation is forecast to reach 2.4% in 2024 and 2.5% in 2025. Unemployment is predicted to be 4.2% in 2024, slightly lower than before.
Fed Chairman Jerome #Powell acknowledged that the U.S. economy has performed better than expected, allowing for the rate cut. He stressed that the Fed is cautious about future rate cuts and aims for a neutral monetary policy.
The markets reacted to the Fed's announcement with declines. The S&P 500 fell 1.46%, the Dow Jones dropped 1.18%, and the Nasdaq 100 dropped 2.14%.
In short, the Fed’s rate cut reflects its focus on maintaining economic stability while managing inflation. The updated projections show moderate growth and inflation, and Powell’s cautious stance indicates that the Fed is taking a measured approach moving forward.
