Fed cuts by a quarter point, indicates fewer reductions ahead
WASHINGTON – The Federal Reserve on Wednesday lowered its key interest rate by a quarter percentage point, the third consecutive reduction and one that came with a cautionary tone about additional reductions in coming years.
In a move widely anticipated by markets, the Federal Open Market Committee cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022 when rates were on the move higher.
Though there was little intrigue over the decision itself, the main question had been over what the Fed would signal about its future intentions as inflation holds steadily above target and economic growth is fairly solid, conditions that don't normally coincide with policy easing.
Read what changed in the Fed statement.
In delivering the 25 basis point cut, the Fed indicated that it probably would only lower twice more in 2025, according to the closely watched «dot plot» matrix of individual members' future rate expectations. The two cuts indicated slice in half the committee's intentions when the plot was last updated in September.
Assuming quarter-point increments, officials indicated two more cuts in 2026 and another in 2027. Over the longer term, the committee sees the «neutral» funds rate at 3%, 0.1 percentage point higher than the September update as the level has drifted gradually higher this year.
«With today's action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,» Chair Jerome Powell said at his post-meeting news conference. «We can therefore be more cautious as we consider further adjustments to our policy rate.»
«Today was a closer call but we decided it was the right call,»
Read more on cnbc.com
