Fed Ends 2024 With a Rate Cut
For the third meeting in a row, the central bank lowered the federal funds rate.
It’s been a year of ups and downs for the real estate capital markets—and a year of holds and cuts for the Federal Reserve. In its final meeting of the year, the central bank cut interest rates yet again on Wednesday, marking the third consecutive decrease to the federal funds rate.
Following this week’s Federal Open Market Committee meeting, Fed Chair Jerome Powell announced a 25-basis-point rate cut. That brings the federal funds rate to a range of 4.25 to 4.5 percent. At this level, it is a full 100 basis points lower than the four-decade peak hit in July 2023.
Powell explained that key economic indicators backed the decision. The economy is growing and the job market is showing resilience. Recent inflation figures, despite a recent uptick, are still on the right path toward 2 percent, albeit a bumpy one.
“Overall, improving supply conditions have supported the strong performance of the U.S. economy over the past year,” Powell said during the FOMC press briefing. “In our summary of economic projections, committee participants generally expect GDP growth to remain solid with a median projection of about 2 percent over the next few years.”
He added that core PCE prices, longer term inflation expectations, weak activity in the housing sector and resilient consumer spending growth were all factors in Wednesday’s decision.
READ ALSO: Up Next? Stay in the Mix Till ’26
The markets have largely priced in the latest 25-basis-point cut, so few will be surprised at the outcome of this week’s meeting. What is less predictable, however, is what the central bank will do in 2025 under a new administration.
A slew of factors, including potential tariffs, the global political climate and inflation could all influence on upcoming Fed moves. In anticipation of the new year, Powell noted that the central bank will make its decisions based on market fundamentals and metrics.
“In our summary of economic projections, participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward,” Powell remarked. “The median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of next year and 3.4 percent at the end of 2026.”
While these projections of the Fed committee participants are higher than those in September, Powell noted that this course is not preset.
