The US Federal Reserve lowered its key lending rate by a quarter of a percentage point, signaling increased uncertainty about future rate reductions. While the move brought rates to a two-year low, the Fed expressed caution, suggesting a slower pace of cuts and emphasizing the need to monitor inflation progress.
by a quarter of a percentage point as its central bank signalled it had increasing doubts over how much and how fast it will cut them next year.
“From here, it’s a new phase, and we’re going to be cautious about further cuts. We are in a place where the risks really are in balance, and we need to see progress on inflation. That’s how we’re thinking about it.We moved pretty quickly to get to here. And I think going forward, obviously we’re moving slower.”
New forecasts released by the Fed reveal that they expect inflation will be more of a problem next. According to the projections central bank officials expect to make fewer rate reductions, with most indicating two cuts for 2025, down from four at theirThe Fed forecast they will make just two quarter-percentage-point rate reductions by the end of 2025 – which is half a percentage point less than it predicted in September.
“The best we can do for them, and that’s who we work for, is to get inflation back down to its target and keep it there so that people are earning big, real wage increases so that their wages are going up, their compensation is going up faster than inflation year upon year upon year,” Powell said.
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