US Federal Reserve cuts interest rate by 25 basis points to 4.25-4.50%

Chaired by Jerome Powell, the rate-setting panel highlighted that inflation remains “somewhere elevated” in U.S. economics.

The United States Federal Reserve announced its eighteenth and final monetary policy decision for 2024 on Wednesday,18 December 2024, following a two-day Federal Open Market Committee (FOMC) meeting. In a widely anticipated move, the Fed reduced the benchmark interest rate by 25 basis points (0.25 percent points) to a target range of 4.25%–4.50%. This marks the Fed’s third consecutive rate cut this year and aligned with market expectations.

Chaired by Jerome Powell, the rate-setting panel highlighted that inflation remains “somewhere elevated” in U.S. economics. As a result, the Fed now projects only two rate cuts in 2025, signaling a cautious approach amid high inflationary pressures.

This latest decision follows the September meeting, where the Fed enacted a greater 50-basis-point cut the first of such magnitude in four years bringing the benchmark rate to a range of 4.75%–5.00%. That move reflected policymakers’ confidence in progress towards their long-term inflation target of 2%.

The Fed has been navigating a challenging economic landscape since March 2022, when it aggressively raised rates in reaction to the most severe inflation in four decades. Over 15 months, the central bank implemented raises totaling 525 basis points, reaching a peak rate of 5.25%–5.50%. Since July 2023, however, the Fed has held rates steady to assess progress in curbing inflation, aiming to guide it back to the 2% target range without disrupting economic stability.

This measured approach highlights the Fed’s effort to balance controlling inflation and nurturing sustainable economic growth.