Fed Cuts Interest Rates by One-Quarter Point

Third rate cut by Fed in 2024

The Federal Open Market Committee (FOMC) cut the federal funds rate by 0.25% following its two-day meeting on December 17 and 18. The 25 basis-point cut positions the target overnight lending rate between 4.25% and 4.50%. It is the Fed’s third cut since a 50 basis-point cut in September, a move which marked its first rate cut in over four years.

In a news conference following today’s meeting, Federal Reserve Chair Jerome Powell said, “With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,”

Chair Powell added, "We can therefore be more cautious as we consider further adjustments to our policy rate.”

In a prepared statement following the FOMC meeting, the committee reported:

• Recent indicators suggest that economic activity has continued to expand at a solid pace
• Labor market conditions have generally eased since earlier in the year
• The unemployment rate has moved up but remains low

Powell said inflation had made progress toward the Fed’s target of 2%, but remained elevated.

The next scheduled FOMC meeting is January 28-29, 2025.

More on this topic from Chief Economist Michael Guckes It is Inflation, Not the Federal Reserve, Driving Mortgage Rates

Federal Funds Rate in orange line. Projections in blue. Image: ConstructConnect

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