From CNBC: 2024-12-18 14:11:37

The Federal Reserve cut its key interest rate by a quarter point, signaling a cautious approach towards further reductions. The decision was widely expected, with future intentions showing two more cuts in 2025 and additional decreases in the following years. Inflation remains above target as economic growth holds steady.

One FOMC member dissented from the decision for the second consecutive meeting. The fed funds rate influences consumer debt like auto loans and mortgages. The post-meeting statement saw little change, but the committee raised its projection for full-year GDP growth to 2.5%, with expectations of a slowdown in the years ahead.

Despite inflation above target and steady economic growth, the Fed is cautious about keeping rates too high. Chair Jerome Powell indicated that rate cuts are intended to recalibrate policy. The Fed has cut benchmark rates by a full percentage point since September, with markets showing skepticism about further cuts as mortgage rates and Treasury yields have risen.

The committee is aiming to avoid an unnecessary slowdown in the economy as macro data shows signs of inflation waning and hiring slowing. Despite the recent rate cuts, markets have responded by increasing mortgage rates and Treasury yields, possibly indicating doubts about the Fed’s ability to cut rates further. The policy-sensitive 2-year Treasury yield is currently at 4.215%.

Read more: Fed rate decision December 2024: