The U.S. Federal Reserve cut its key interest rate by a quarter-point, its third reduction this year, but signaled a slower pace of cuts in 2024 due to lingering inflation. Policymakers projected just two rate cuts in 2025, down from a previous estimate of four. The Fed is approaching a 'neutral' rate level that neither stimulates nor hinders the economy, suggesting consumers may not see significant rate reductions for borrowing in the near future. The Fed faces challenges in achieving a 'soft landing' for the economy, as inflation remains above its 2% target despite brisk economic growth.
Christopher Rugaber, The Associated PressWASHINGTON — The U.S. Federal Reserve cut its key interest rate Wednesday by a quarter-point — its third cut this year — but also signaled that it expects to reduce rates more slowly next year than it previously envisioned, largely because of still-elevated inflation.
This year’s Fed rate reductions have marked a reversal after more than two years of high rates, which largely helped tame inflation but also made borrowing painfully expensive for American consumers. The unemployment rate, while still low at 4.2%, has risen nearly a full percentage point in the past two years. Concern over rising unemployment contributed to the Fed’s decision in September to cut its key rate by a larger-than-usual half point.
“I’ve got the least amount of conviction about what will happen with the economy over the next 12 months than I’ve had in years,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “This is going to be a work in progress as things evolve.”
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