The Federal Reserve will make its final interest rate decision for 2024 on Wednesday, capping a year during which the central bank provided some financial relief to inflation-weary borrowers in September. This is a first rate reduction In four years.

The Federal Reserve is likely to make a third consecutive rate cut of 2024 on Dec. 18, according to economists surveyed by financial data firm FactSet. Yet many experts are preparing for a slower pace of cuts in 2025, given the country's still-stagnant inflation rate and some of President-elect Donald Trump's proposed economic policies that could prove inflationary if implemented.

The Federal Reserve has been battling inflation since March 2022, when it began raising rates to cool the economy, ultimately pushing its benchmark rate to its highest level in 23 years. While inflation has declined significantly since November's consumer price index increased by 2.7%Exceeded the Fed's goal of reducing inflation to a 2% annual rate.

This signals that the fight against inflation is far from over, although November's inflation report was in line with economists' expectations. At the same time, the unemployment rate has surged higher this year, increasing the Fed's concerns about weaknesses in the labor market, and helping open the door to a recent rate cut, one economist said.

“The Fed will likely move forward with a 25 basis point rate cut at the December meeting,” Jacob Channell, senior economist at LendingTree, said in an email. “However, this may be the last cut for some time,” he said. ,

“Since the incoming Trump administration's policies could lead to a resurgence in inflation or otherwise destabilize the economy, the Fed may take a wait-and-see approach and keep rates on hold at its January meeting,” the channel said. “

On what date is the Federal Reserve meeting in December?

The Federal Reserve's Federal Open Market Committee (FOMC) meeting is on December 17-18, which is the last meeting of the year.

What time does the Federal Reserve announce rates?

The central bank is set to announce its rate decision at 2 pm Eastern Time on December 18.

This will be followed by a press conference at 2:30 pm Eastern with Federal Reserve Chair Jerome Powell, during which Powell will discuss the Fed's economic outlook and answer questions from reporters.

Will the Fed cut rates in December?

Nearly 9 in 10 economists surveyed by financial data firm FactSet expect the Fed to cut its benchmark rate by 0.25 percentage points on Wednesday.

If that happens, the federal funds rate – the interest rate that banks charge each other for short-term loans – would be lowered to a range of 4.25% to 4.5%, down from its current target range of 4.5% to 4.75%. Till is less.

This would be the Fed's third consecutive rate cut this year, starting with a massive 0.5 percentage point cut in September, which was followed by Reduction of 0.25 percentage points At its November meeting. If the Fed cuts another 0.25 percentage point on Dec. 18, interest rates will have fallen by a full percentage point since September.

How will another rate cut affect my money?

Any cut in the federal funds rate could lower the cost of borrowing for millions of Americans. But a 0.25 percentage point reduction isn't likely to make that much of a difference, with Matt Schultz, chief credit analyst at LendingTree, saying it could “cut a dollar or two off your monthly loan payment.”

“Another rate cut at the end of a chaotic year is welcome news, but ultimately it doesn't mean much to people with debt,” Schultz said.

Still, new APR rates on credit cards dropped to 24.43% in September from 24.92%, according to LendingTree data. Loan rates for other products, such as home equity lines of credit, have also declined.

Despite the rate cuts, mortgage rates have not increased much and remain near 20-year highs, discouraging many potential home buyers. While the Fed's benchmark rate influences household borrowing costs, mortgages are also influenced by macroeconomic trends and changes in the yield for the US 10-year Treasury bond.

“Going forward, mortgage rates will continue to fluctuate on a week-to-week basis and it is impossible to say with certainty where they will end up,” LendingTree's Channell said.

What's going on with inflation and the economy?

Inflation, or the rate at which the prices of goods and services change over time, has cooled since reaching a 40-year peak of 9.1% in June 2022.

The Fed began raising its benchmark rates higher in 2022 to stoke economic demand and tame inflation. But while inflation has eased since the 2022 peak, prices for many products and services remain significantly higher than before the pandemic.

And prices are likely to remain high unless there is a period of deflation, which usually occurs only during severe economic downturns such as the Depression.

This has left many Americans feeling economically vulnerable, with millions expressing their frustration at the ballot box last month and voting for Trump. economic perspective To end the “nightmare of inflation”.

How might Trump's economic plans affect the Fed?

Trump has vowed to tackle rising prices, but some of his policies could prove inflationary, according to Wall Street economists. For example, Trump last month Plans unveiled To impose a 25% tariff on all imports from Mexico and Canada on his inauguration day, 20th January,

The president-elect also said he intends to impose an additional 10% tariff on all imports from China.

But tariffs are essentially consumption taxes that are often paid by consumers. In other words, American buyers may have to pay more for everything from avocados imported from Mexico to TV sets made in China.

Due to the possibility of inflation rising into 2025 if Trump enacts sweeping tariffs, many economists expect the Fed to slow or pause its rate decisions next year in a wait-and-see approach.

“Fed officials may prefer to remain cautious given uncertainty about the new administration's policies, particularly potential tariff increases,” Goldman Sachs economists said in a Dec. 15 research report.

Will the Federal Reserve cut rates in 2025?

Economists are predicting the Fed will continue to cut rates next year, although some are cutting the number of cuts.

The Fed will release its Summary of Economic Projections (SEP) on December 18, which will provide some information about what the FOMC is expecting in 2025.

According to Gregory Daco, chief economist at EY, in an email, it's possible the Fed's outlook will assume three rate cuts of 0.25 percentage points in 2025, up from the four rate cuts the central bank last made when it issued its SEP in September. is less than.

At his Wednesday press conference, Daco said, Powell could have “repeated the familiar metaphor of slowly walking into a dark room full of objects to justify 'skipping' a potential rate cut at the January meeting.”

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