Outlook Business Desk
The Fed cut its benchmark interest rate by 25 basis points to 4.25-4.50 per cent, marking the third consecutive cut since September. This shift from the 23-year high rate reflects a less restrictive stance, though Powell emphasized caution
The Fed reduced its 2025 rate cut projections to two quarter-point cuts, half of the previous September forecast, reflecting caution due to persistent inflation. Officials stressed the need to assess economic data and risks before further easing
The Fed raised its 2025 inflation forecast to 2.5 per cent, with core inflation expected below 2 per cent by 2027. It revised US economic growth to 2.5 per cent this year and 2.1 per cent in 2025. Powell noted inflation progress but expects 1-2 more years to reach the 2 per cent target
The Fed updated its unemployment forecast, expecting 4.2 per cent this year, slightly lower than before, with a rise to 4.3 per cent in 2025 and 2026. Rising unemployment influenced previous rate cuts, including the 50 bps reduction in September
The Fed cut the overnight reverse repurchase agreement (RRP) rate by 5 basis points to ensure smooth US funding markets and support its policy rate. It also slowed its balance-sheet runoff, reducing Treasury bond cuts to $25 billion monthly
Wall Street dropped sharply after the Fed's announcement, with the S&P 500 having its worst rate decision day since 2001, the Nasdaq 100 falling 3.6 per cent, and the Dow extending its longest losing streak since 1974
The Fed's cautious stance on 2025 rate cuts stems from ongoing inflation concerns and economic risks, with lower expectations for aggressive cuts, causing a sharp stock market reaction