Fed cuts interest rates for third time in a row

After a two-day meeting, early on December 19 (Vietnam time), the Fed decided to lower the reference interest rate by another 0.25 percentage points, bringing the federal funds rate down to 4.25-4.5%. This is the third consecutive time the Fed has loosened monetary policy this year, bringing the total interest rate reduction to 1% since September.

" Economic activity continues to expand at a solid pace. Unemployment remains low and inflation is rising moderately," the Fed's Federal Open Market Committee (FOMC) said in a statement. They said they would carefully consider upcoming data, both the outlook and risks, in making their interest rate decision.

This raises doubts that the Fed will stop cutting interest rates at its meeting in late January 2025.

Next year, Fed officials expect only two 25 basis point rate cuts. They also raised their inflation forecast for Donald Trump’s first year in office from 2.1% to 2.5%, well above the Fed’s 2% target.

Fed Chairman Jerome Powell. (Photo: Xinhua)

In an economic forecast update released after the meeting, the Fed slightly raised its 2025 US economic growth forecast to 2.1%, while expecting an unemployment rate of 4.3%.

The average inflation forecast by the end of 2025 was raised to 2.5%, from 2.1% given in September 2024.

The committee's decision to adjust interest rates comes as inflation remains above target and the economy is forecast to grow at a 3.2% rate in the fourth quarter and unemployment hovers around 4%.

While the conditions are still right for the Fed to keep rates steady or raise them, officials remain wary of keeping rates too high and unnecessarily slowing the economy. Despite solid macroeconomic data, a Fed report earlier this month noted that the economy has grown only “moderately” in recent weeks, with signs of cooling inflation and slowing job growth.

Chairman Jerome Powell has indicated that the rate cut is an effort to recalibrate policy as financial conditions do not need to be tightened in the current environment.

Ngoc Vy

Source: https://vtcnews.vn/fed-cat-giam-lai-suat-lan-thu-ba-lien-tiep-ar914710.html