The Federal Reserve has announced a third consecutive interest rate cut, signaling progress in the fight against inflation as the United States heads into a new presidential administration.
The latest reduction of 25 basis points follows similar cuts in November 2024 and September, which marked the first interest rate drop in nearly four years. Over the past several years, the Federal Reserve aggressively raised rates to curb pandemic-driven inflation, which soared to a 40-year high.
With this decision, the federal funds rate decreases from 4.50% to 4.25%. Inflation now hovers just above the Fed’s target, showing significant improvement since its peak. While the immediate effects of the rate cut may not be felt, analysts believe this move is part of a broader trend toward monetary easing by the central bank.
Looking ahead, the Federal Reserve is widely expected to continue trimming interest rates into 2025. Fed Chair Jerome Powell, speaking earlier this year in Jackson Hole, Wyoming, expressed optimism that inflation had been successfully controlled. Powell’s confidence suggests a shift toward reversing the steep rate hikes seen over recent years.
However, projections for future cuts have moderated. Analysts anticipate two rate cuts in 2025, compared to the three cuts in 2024, which fell short of the six originally predicted. “The market outlook has shifted significantly,” said Bloomberg analyst Manus Cranny. “What we’re seeing now is a hawkish adjustment, with expectations leaning toward two cuts next year.
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