Federal Reserve rate decision holds high expectations for traders. The Federal Reserve is set to announce its final rate decision 2024 at 2 p.m. ET, followed by an updated dot plot to provide insights into policymakers’ outlook for 2025. Here’s a breakdown of what to watch for:
The Fed is widely expected to cut its benchmark interest rate by 25 basis points (0.25%), lowering the target range to 4.00%–4.50%. Despite strong economic data and stickier-than-expected inflation, the Fed appears to be preemptively reducing rates to support growth. However, with ongoing cooling in the labor market and financial resilience, the Fed’s cautious tone signals that this could be the last cut for a while.
Recent data has shown stronger-than-expected GDP growth, continued consumer spending, and resilient employment trends. However, cooling signs in certain sectors suggest a need for a supportive policy stance. Inflation has moderated but remains above the Fed’s 2% target. This complicates the decision to ease monetary policy further, as additional cuts could reignite inflationary pressures.
President-elect Donald Trump’s incoming policies—ranging from tariffs to potential tax cuts—add uncertainty to the economic outlook. The Fed must navigate these risks carefully as they could significantly impact growth and inflation.
Cautious Outlook for 2025
Fed Chair Jerome Powell and the updated dot plot are likely to signal a slower pace of rate cuts next year, with fewer cuts projected than previously anticipated. Chair Powell has emphasized the Fed’s ability to “be a little more cautious” due to the unexpectedly strong economic backdrop.
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