US Fed Meeting: FOMC Cut Rates By 100 Bps In 3-Consecutive Policies; Hints At Fewer Rate Cuts In 2025

The US Federal Reserve has trimmed key fund rates for the third time in a row on Wednesday, December 18, which is the last monetary policy outcome of 2024. The latest rate cut is 25 bps, taking the total number of cuts in interest rates to 100 bps. However, the Jerome Powell-led FOMC has further signaled for a slower pace of cuts in 2025.

In its policy statement, FOMC said that to support its goals, the committee decided to lower the target range for the federal funds rate by 1/4 percentage points to 4-1/4 to 4-1/2 per cent. The rate cut of 25 bps is in line with market expectations.

FOMC aims to achieve maximum employment and inflation at the rate of 2 per cent over the longer run.

FOMC said the risks to achieving its employment and inflation goals are roughly in balance. Adding it said, "The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate."

The Fed observed that the recent indicators suggest that economic activity has continued to expand at a solid pace.

"Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 per cent objective but remains somewhat elevated," FOMC said.

However, FOMC has signalled for a slower pace of cuts in the coming policies. It said, "Considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."

In its projections report, FOMC said, the outlook for the future path of the federal funds rate is subject to considerable uncertainty.

Meanwhile, FOMC decided that they will continue reducing its holdings of Treasury securities agency debt and agency mortgage‑backed securities.

Furthermore, in assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook, it said.

Additionally, FOMC added, the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against the action was Beth M. Hammack, who preferred to maintain the target range for the federal funds rate at 4-1/2 to 4-3/4 per cent.

This will be the second time the Fed has cut rates by 25 bps after the November 2024 policy. However, the easing of the rate cycle began on an aggressive approach with a 50 bps cut in the September 2024 policy, which is the first cut in four years.