Fed slashes interest rates a quarter point, signals slower pace of cuts in 2025

The Federal Reserve on Wednesday slashed its key lending rate by a quarter percentage point for the final time this year — but signaled the pace of cuts will slow in the year ahead as the central bank moves to keep a lid on inflation, sending the Dow down more than 1,000 points. The widely expected quarter-point cut reduced the Federal Reserve’s target rate to between 4.25% and 4.5%. “Today was a closer call but we decided it was the right call,” Federal Reserve Chair Jerome Powell said at a press conference after the Fed’s Dec. 17-18 meeting. He said after having lowered interest rates by 1 percentage point, the Fed can “be more cautious as we consider further adjustments to our policy rate.” US stocks tanked after Powell hinted there may be fewer interest rate cuts in the new year. The Dow Jones Industrial Average tumbled more than 1,000 points in its 10th-straight day of losses. “Santa came early and dropped a 25-bps rate cut in the market’s stocking, but accompanied it with a note saying there would be coal next year,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note. The stock market’s reaction to the underwhelming outlook could, in turn, hamper the labor market, he added. “Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low,” policymakers said in a press release. The Fed stressed that moving forward into the new year, the economic outlook remains “uncertain.” In September, the Fed issued an outsize, half-point interest rate cut – its first cut since 2020 – on “greater confidence” that inflation was calming toward the bank’s 2% goal and that a weak job market posed a greater risk. The Fed removed its language about “greater confidence” and cut rates again in November by a quarter point. The third cut comes amid a mixed bag of economic data. Powell said it has “been a bit frustrating” that inflation is taking longer to cool than policymakers expected – but he added the economy has performed better on unemployment and inflation than many people would have expected just a few years ago. Though inflation appeared to be cooling, the Consumer Price Index showed inflation rose 2.7% in November – heating up for the second month in a row and above the 2.6% seen in October, according to the Labor Department. Consumer spending remained relatively unharmed. Retail sales jumped 0.7% in the same month, beating forecasts of 0.6%, and October’s retail sales figure was revised up to 0.5% from 0.4%, according to the Census Bureau. However, an unsteady labor market has raised some cause for concern as President-elect Donald Trump has called for the Fed to lower rates at a quicker pace. Hiring rates and job openings have declined this year, and job growth in crucial sectors like manufacturing, business and professional services has tapered off to a standstill. The Fed is still working to deliver the US economy a “soft landing,” in which both inflation and unemployment remain low without a market crash. But the outlook for 2025 is relatively unclear, especially as some economists worry Trump’s mass tariffs and immigration policies could reheat inflation. *** Fair Use Disclaimer: This video is transformative and does not harm or compete with the original works. All content is created for educational or informational purposes. Only limited visual and audio materials are used, strictly when necessary. The purpose of this content is to spread knowledge and raise awareness. Note: This disclaimer is intended to support compliance with content policies and provide context for the material shared.