The US Federal Reserve Cuts Interest Rates by 25 Basis Points in December Meeting

In a widely anticipated move, the Federal Reserve’s Federal Open Market Committee (FOMC)
decided to cut interest rates by 25 basis points during its December meeting.
This lowered the upper bound of the federal funds rate from 4.75% to 4.50%,
marking the third consecutive rate reduction following cuts in September and November.
This series of reductions is the first since March 2020.

Topic

Interest Rates

Inflation

Market Outlook

Interest Rates

The decision comes amid an economic environment signaling a slowdown in inflation.
However, inflation remains relatively high, highlighting ongoing challenges for the US economy.

While the majority of FOMC members agreed on the rate cut, there were differing opinions.
The President of the Cleveland Federal Reserve voted against the decision,
favoring maintaining rates at current levels.
However, the majority viewed the rate cut as essential to supporting stable economic growth and addressing inflation.

The committee noted that US economic activity has continued to grow steadily in recent months,
despite noticeable slowdowns in certain sectors.
The labor market has shown general improvement since the beginning of the year,
with employment conditions continuing to strengthen,
even as the unemployment rate saw a slight uptick but remains at historically low levels.

Inflation

Regarding inflation, the Federal Reserve highlighted progress toward its 2% target for the Consumer Price Index,
though some sectors continue to experience inflationary pressures.
The Fed’s monetary policy aims to strike a balance between supporting economic growth and maintaining price stability.

The Fed’s statement emphasized its commitment to closely monitoring economic data to determine its next steps.
The statement noted that monetary policy decisions will consider labor market conditions,
inflation trends, and developments in global financial markets.

Additionally, the Fed announced its continued commitment to reducing its holdings of Treasury securities
and mortgage-backed securities as part of its balance sheet normalization strategy.
It reaffirmed its readiness to adjust its approach if new risks emerge that could affect
its dual mandate of maximum employment and price stability.

Market Outlook

Markets are now focused on the Federal Reserve’s next moves,
with expectations of continued gradual rate cuts if data supports further inflation slowdown.
However, the Fed has signaled that the number of rate cuts may be fewer than previously anticipated.

The US Federal Reserve Cuts Interest Rates by 25 Basis Points in December Meeting

The US Federal Reserve Cuts Interest Rates by 25 Basis Points in December Meeting

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