Fed Cuts Rates By 25bps, Projects Three More Cuts in 2025

Washington, D.C. - At its December meeting, the Federal Reserve lowered its benchmark interest rate by 25 basis points to 4.25-4.50%, citing solid economic growth and easing inflation pressures.

Recent economic indicators show continued expansion at a solid pace, while labor market conditions have generally eased with unemployment remaining low, the Federal Open Market Committee said.

The central bank noted that inflation has progressed toward its 2% objective but remains somewhat elevated, with risks to achieving its employment and inflation goals roughly balanced.

In his press conference, Fed Chair Jerome Powell said that economic activity and labor market data remain strong. GDP rose at an annual rate of 2.8% in the third quarter, matching the second quarter's pace.

The latest projections show policymakers expect core PCE inflation to reach 2.8% in 2024, above the September forecast of 2.6%, before declining to 2.5% in 2025 and 2.2% in 2026.

The labor market continues to show resilience, with payroll job gains averaging 173,000 per month over the past three months and unemployment at 4.2% in November.

The committee voted 11-1 to lower rates, with Beth Hammack dissenting in favor of maintaining the target range at 4.50-4.75%.

Looking ahead, Fed officials project the federal funds rate will end 2025 at 3.9% and 2026 at 3.4%, suggesting expectations for continued gradual easing if economic conditions permit.

The Fed will continue reducing its holdings of Treasury securities, agency debt, and mortgage‑backed securities as part of its balance sheet normalization process.