Fed Slashes Interest Rates By 25 bps

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The US Federal Reserve has finally announced its eighth and last policy decision for 2024 after a two-day Federal Open Market Committee (FOMC) meeting. It has cut interest rates by 25 bps to 4.5%-4.75%, aligning with market expectations. This marks the third consecutive rate cut since a 0.5% reduction in September. It also scaled down the number of cuts it expects to make next year. The consensus among Fed officials is for three rate cuts next year, down from four previously forecasted in September. Notably, Wall Street had expected the central bank to slash the benchmark interest rate by 25 basis points (bps) for the second straight meeting after lowering it to 4.50 to 4.75 percent in November. Markets were confident in a rate reduction, with CME Group’s FedWatch tool indicating a 99% probability. The last policy verdict by the central bank came just after Republican Donald Trump secured a landslide victory in the 2024 US presidential elections. In the September meeting, the US Fed slashed the benchmark interest rate by 50 basis points to 4.75 percent to 5 percent for the first time in four years after policymakers expressed confidence that inflation was consistently on track to come near the target level. Fed Not In A Hurry To Slash Rates The US Fed policymakers estimate the benchmark interest rate falling by another half-point by the end of this year, another full percentage point in 2025, and a final half-point reduction in 2026 to end in a 2.75 percent-3.00 percent range.  The Fed Chair Chairman, Jerome Powell, had earlier indicated that the committee is in no hurry to reduce the key benchmark interest rates and that the committee will be more careful in the rate cut approach.  Also, earlier, Goldman analysts referenced a speech by Beth Hammack, president of the…