Federal Reserve's FOMC Dot-Plot publication

Fed to Cut Rates by Quarter-Point in Last Meeting of Biden Era, Amid Inflation and Policy Uncertainty

Dec 15, 2024, 06:58 AM

The U.S. Federal Reserve is widely expected to announce a quarter-point reduction in its key lending rate on December 18, marking its last meeting under President Joe Biden's administration. Despite a recent uptick in inflation, the Fed's decision reflects a shift towards supporting the labor market, with the rate expected to fall to a range of 4.25% to 4.5%. This move comes amid uncertainty over the economic policies of President-elect Donald Trump, who has pledged to address the high cost of living. Analysts predict a more gradual approach to rate cuts in 2025, with markets pricing in a 65% chance of rates being three-quarters of a percentage point lower by the end of next year. The Fed will also release updated economic forecasts, which will include estimates on future rate adjustments. This decision is anticipated to impact borrowing costs for consumers, affecting mortgages, credit cards, and car loans. The Fed's favored inflation gauge has fallen sharply in recent years, remaining close to its 2% target, and the futures markets were pricing in a probability of more than 95% that the Fed would move ahead with a quarter-point cut. Additionally, the FOMC Dot-Plot and Fed Chair Jerome Powell's stance on future rate decisions will be closely watched.