As many economists anticipated, the Federal Reserve voted to lower the federal funds rate one last time before the end of the year following the December meeting of the Federal Open Markets Committee (FOMC). The committee agreed to lower rates by 25 basis points to 4-1/4 to 4-1/2 percent, marking the third rate reduction of the year.
The committee said it expected economic activity to continue to expand at a solid pace even as labor market conditions generally continue to ease, with the unemployment rate ticking up but remaining low. Inflation has made progress toward the FOMC’s 2 percent objective but remains somewhat elevated.
“The committee judges that the risks to achieving its employment and inflation goals are roughly in balance,” the FOMC wrote in a statement. “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate.”
Economists have noted the uncertainty regarding the potential impact of the incoming presidential administration’s policies on inflation and other key indicators may cause the committee to proceed with caution regarding rate cuts in 2025.
The FOMC said it is committed to closely monitoring the economic implications of its monetary policy decisions based on the most up to date information and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
The Fed previously cut interest rates by 25 basis points in November and 50 basis points in September, ending an extended drought in rate reductions.