• Mon. Dec 23rd, 2024

    Fed lowers rates but sees fewer cuts ahead

    ByTrulyNews

    Dec 23, 2024
    Fed lowers rates but sees fewer cuts ahead
    Fed lowers rates but sees fewer cuts ahead
    US Federal Reserve Chair Jerome Powell departs after speaking at a press conference where he announced the Fed had cut interest rates by a quarter point following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, December 18, 2024. [Photo/Agencies]

    WASHINGTON — The US Federal Reserve on Wednesday slashed interest rates by 25 basis points, the third consecutive rate cut in this easing cycle, while signaling a slower-than-expected pace of easing next year.

    Fed officials estimated two interest rate cuts next year, fewer than four projected in September. They also marked up their projections for core inflation and economic growth next year, while lowering their forecast for the unemployment rate.

    Federal Reserve Chair Jerome Powell said more reductions in borrowing costs hinge on further progress in lowering stubbornly high inflation.

    “I think we’re in a good place, but I think from here it’s a new phase and we’re going to be cautious about further cuts,” Powell said at a news conference after the cut.

    US stocks plunged following the rate cuts, with the Dow Jones Industrial Average falling 2.58 percent, the S&P 500 sinking 2.95 percent and the Nasdaq dropping 3.56 percent.

    Echoing a slump in US equities, Asian stocks slid on Thursday, with shares in Japan opening lower while Australian stocks fell about 2 percent.


    ‘Hawkish’ message

    Overseas economists and business insiders said the Fed had delivered a “hawkish” message, which underscores policymakers’ concern about lingering inflation as well as sweeping economic changes under the incoming Donald Trump administration.

    “This was an unabashedly hawkish message from the Fed,” the Financial Times reported, citing Aditya Bhave, a senior US economist at Bank of America.

    Officials’ forecast for two quarter-point rate cuts next year, rather than the three expected by some economists, represented a “wholesale shift”, he said.

    The meeting comes at a transitioning period of the US government, mixed economic data and unreliable economic data owing mostly to storms and strikes, said Christian Hoffmann, head of fixed income at Thornburg Investment Management, noting “the path forward becomes much more opaque”.

    The market is dismayed by the message delivered by the Fed, experts observed, voicing concerns over further impact on the global market.

    “Overall this is a negative cocktail for risk assets, and it is spooking the market,” Jim Awad, senior managing director at Clearstead Advisors, was quoted by Bloomberg as saying.

    Xinhua – Agencies