VOA News | Wednesday, December 18, 2024 
US Federal Reserve cuts interest rate but adjusts expectations for future

The U.S. Federal Reserve on Wednesday lowered its target interest rate but signaled it might take longer than previously expected to bring inflation down to the central bank’s target rate of 2% per year. That means there will likely be fewer rate reductions in 2025 than had been projected. The Fed’s Federal Open Market Committee lowered the target range of the federal funds rate, a benchmark that is used to set rates for everything from mortgages to credit card loans, by one-quarter of a percentage point to between 4.25% and 4.5%. The reduction was widely expected, but FOMC members updated their projections for the future, suggesting it might take until 2027 to get interest rates down to 2%. As recently as September, they had projected that they would achieve that goal in 2026. Also changed was the range of rates that they believe will eventually reflect a “neutral” interest rate stance – that is, one that is designed to be neither restrictive nor stimulative. In September, they projected a long-run neutral rate of between 2.5% and 3.5%. That range ticked up to between 2.8% and 3.6%. – Powell upbeat – Federal Reserve Board Chair Jerome Powell said in a press conference Wednesday that the committee was trying to balance its fight against inflation, which it combats by raising interest rates, with its commitment to full employment, which sometimes requires lowering rates. He said the decision to cut rates was influenced by some “softening” in the job market. However, he said the new target rate was…Read more