In support of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run, the Federal Reserve on Wednesday announced its widely expected decision to lower interest rates by another quarter point.

The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent, matching the rate cut seen in early November.

The central bank also described the economic outlook as uncertain and said the risks to both sides of its dual mandate are roughly in balance.

With the rate cut almost universally expected, the focus of the announcement was on Fed officials' latest economic projections, which indicate fewer than previously forecast rate cuts next year.

The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September.

Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.

The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 percent compared to the 2.1 percent forecast in September.

Fed officials also upwardly revised their forecast for GDP growth in 2025 to 2.1 percent from 2.0 percent and downwardly revised their forecast for the unemployment rate to 4.3 percent from 4.4 percent.

The Fed noted it will carefully assess incoming data, the evolving outlook, and the balance of risks when considering the extent and timing of additional adjustments to the target range for the federal funds rate.

Powered by Commodity Insights