Fed Lowers Interest Rates By Quarter Point, Forecasts Fewer Rate Cuts

WASHINGTON, Dec 19 (Bernama-dpa-AFX) - In support of its dual goals of maximum employment and inflation at the rate of 2 per cent over the longer run, the Federal Reserve on Wednesday announced its widely expected decision to lower interest rates by another quarter point, reported German news agency dpa

The Fed announced it had decided to lower the target for the federal funds rate by 25 basis points to a range of 4.25 per cent to 4.50 per cent, matching the rate cut seen in early November.

The central bank also described the economic outlook as "uncertain" and said the risks to both sides of its dual mandate are "roughly in balance".

bootstrap slideshow

With the rate cut almost universally expected, the focus of the announcement was on Fed officials' latest economic projections, which indicate fewer than previously forecast rate cuts next year.

The latest projections suggest rates will be in a range of 3.75 per cent to 4.0 per cent by the end of 2025 compared to the range of 3.25 per cent to 3.50 per cent forecast in September.

Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.

The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 per cent compared to the 2.1 per cent forecast in September.

Fed officials also revised their forecast for GDP growth in 2025 upwardly to 2.1 per cent from 2.0 per cent and revised downward their forecast for the unemployment rate to 4.3 per cent from 4.4 per cent.

The Fed noted it will carefully assess incoming data, the evolving outlook, and the balance of risks when considering the extent and timing of additional adjustments to the target range for the federal funds rate.

Notably, the decision to lower rates at this meeting was not unanimous, as Cleveland Fed President Beth M. Hammack preferred to leave rates unchanged.

The Fed's next monetary policy meeting is scheduled for January 28-29, with CME Group's FedWatch Tool currently indicating an 88.5 per cent chance the central bank will leave rates unchanged.

-- BERNAMA-dpa-AFX