The Federal Reserve announced its third interest rate cut of the year, lowering the benchmark rate by 0.25 percentage points due to cooling inflation. This brings the total rate reduction to 1 percentage point since September, providing relief to those with credit card debt.
The Fed reduced the federal funds rate to a range of 4.25% to 4.5%, down from the previous range of 4.5% to 4.75%. This decision follows previous rate cuts of 0.5 percentage points in September and 0.25 percentage points in November.
Looking ahead to 2025, the Fed now predicts only two rate cuts instead of the four originally forecasted in September. They anticipate the federal funds rate to reach a median level of 3.9% by the end of 2025.
Despite the recent rate cuts, inflation remains above the Fed’s 2% target, driven by high housing and food costs. Analysts believe the Fed may reduce rates less in 2025 to prevent the economy from overheating.
The Fed’s next rate meeting is scheduled for late January, after President-elect Donald Trump’s inauguration. Most economists expect the Fed to keep rates stable at that meeting.
This is an evolving situation and will be updated as new information becomes available.
Author: Aimee Picchi, Associate Managing Editor at CBS MoneyWatch.
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