The Federal Reserve lowered interest rates but signaled a pause in further cuts due to stable unemployment and persistent inflation.
The US Fed eral Reserve cut interest rates and signalled it will slow the pace at which borrowing costs fall any further given a relatively stable unemployment rate and little recent improvement in inflation. Economic activity has continued to expand at a solid pace with an unemployment rate that remains low and inflation that remains somewhat elevated, the central bank’s rate-setting Fed eral Open Market Committee said in its latest policy statement.
In considering the extent and timing of additional adjustments to the target range the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks, it said in new language that sets up a likely pause to rate cuts beginning at the January 28-29 meeting. Fed chair Jerome Powell will hold a press conference at 6.30am AEDT to elaborate on the Fed’s latest policy decision. US central bankers now project they will make just two quarter-percentage-point rate reductions by the end of 2025. That is half a percentage point less in policy easing next year than officials anticipated as of September, with Fed projections of inflation for the first year of the new Trump administration jumping from 2.1 per cent in their prior projections to 2.5 per cent in the current ones - well above the central bank’s 2 per cent target. Slower progress on inflation, which is not seen returning to the 2 per cent target until 2027, translates into a slower pace of rate cuts and a slightly higher ending point of 3.1 per cent, also hit in 2027, versus the prior “terminal” rate of 2.9 per cent seen as of September.Advertisement The reduction in the benchmark policy rate to the 4.25 per cent-4.50 per cent range was opposed by Cleveland Fed President Beth Hammack, who preferred to leave the policy rate unchanged
FED INTEREST RATES INFLATION UNEMPLOYMENT ECONOMICS
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