U.S. Bureau of Labor Statistics and Federal Reserve reports

Fed Cuts Rates by 25 Basis Points to 4.3%, Powell Signals Cautious Approach Amid Inflation and Labor Market Progress

Dec 18, 2024, 07:42 PM

Federal Reserve Chair Jerome Powell, during a press conference following the Federal Open Market Committee (FOMC) meeting, announced a quarter percentage point reduction in the policy interest rate, bringing the total reduction to 100 basis points. Powell described the decision as a 'closer call' but emphasized it was the right choice to foster the achievement of the Fed's dual goals of maximum employment and price stability. He noted that the U.S. economy is performing well, with inflation much closer to the 2% target, and the labor market cooling in a gradual and orderly manner. Powell expressed confidence in the path to 2% inflation, suggesting it might take another year or two to reach this goal. He highlighted that the Fed's policy stance is now significantly less restrictive, with the policy rate at 4.3%, and the policy is still meaningfully restrictive, allowing for a more cautious approach to future rate adjustments. Powell also mentioned that the Fed will continue to monitor inflation progress and the labor market closely, aiming to maintain restrictive policy to ensure inflation returns to the target level. He indicated that the Fed is entering a new phase in the process and acknowledged geopolitical turmoil as a risk, while ruling out a rate hike in the coming year.