The US Reserve Bank cuts interest rates for the third time in a row

The US Federal Reserve today, Wednesday, reduced its key interest rate by a quarter of a percentage point, which is the third consecutive reduction, which came with a warning tone about additional cuts in the coming years.

In a move that was widely expected by Before the markets, the Federal Open Market Committee cut the overnight borrowing rate to a target range of 4.25% to 4.5%, the level it was at in December 2022 when rates were on their way to… Rise.

 

Although there is not much ambiguity around the decision itself, the main question was what the Fed might signal about its future intentions with inflation holding above The target and the economy growing fairly strongly, conditions that do not usually coincide with policy easing.

 

In introducing the 25 basis point cut, the Fed indicated that it might It will be reduced only twice in 2025, According to the "dot plot" matrix Which is closely monitored for individual members’ future interest rate expectations. The two cuts indicated a halving of the committee’s intentions when the chart was last updated in September.

 

Assuming quarter-point increases, officials pointed to two more cuts in 2026 and another in 2027. In the longer term, the Committee views the “neutral” funds rate as At 3%, it is 0.1 percentage points higher than in the September update as the level has gradually risen this year.

 

The federal funds rate sets what banks charge each other for lending overnight but also affects a variety of consumer debt such as car loans, credit cards and mortgages.

 

The cut came even though the committee raised its GDP growth forecast for the year Entire to 2.5%, which is half a percentage point higher than in September. However, in the following years, officials expect GDP to slow to 1.8%, which is a long-term forecast.

 

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