In a strategic shift, the Federal Reserve lowered interest rates again in December 2024, marking a significant step in its ongoing efforts to stimulate the economy amidst fluctuating inflation and economic growth concerns. The decision to cut rates by 25 basis points, decreasing the target range to 4.25% to 4.50%, reflects the Fed’s response to recent signs of economic slowdown and subdued inflationary pressures. Fed Chair Jerome Powell stated, ‘This reduction is necessary to ensure that we continue to support the economy and promote maximum employment.’ Looking forward, officials indicated a cautious outlook, projecting that fewer rate reductions may occur in 2025. Mary Daly, president of the San Francisco Fed, noted, ‘While we are committed to supporting growth, we must also remain vigilant about potential inflationary risks.’ The Fed’s decision is not without controversy, as inflation is still reported above the target level, influencing divergent opinions among economists and policymakers. Projections revealed that GDP growth is expected to slow to 2% in 2025, compared to earlier forecasts. As the economic landscape evolves, the central bank is tasked with balancing inflation control and economic expansion. The upcoming months will be pivotal as markets react to the Fed’s decisions and gauge the Fed’s commitment to its dual mandate.
Federal Reserve Reduces Interest Rates, Signals Modest Future Cuts
