FOMC Meeting: Key Takeaways

December FOMC meeting | December 18, 2024

The Federal Open Market Committee (FOMC or the Committee) reduced the federal funds rate by 25 basis points (bps; 100 bps equal 1%) to 4.25% – 4.50%, continuing with the interest-rate-cutting cycle that started in September. The Committee stated that inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated. The Federal Reserve (Fed) continues reducing its holdings of U.S. Treasury securities and agency mortgage-backed securities, under the updated monthly cap of $25 billion and $35 billion, respectively.

• Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.
• In support of its goals, the Committee decided to lower the target range for the federal funds rate by 25 basis points to 4.25%-4.50%. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate (price stability and full employment).

• In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• The Committee will continue to take into account a wide range of information including readings on labor market conditions, inflation pressures, inflation expectations, and financial and international developments.

• A 25-basis point cut in today’s meeting was expected. There was one dissent at today’s meeting as Beth Hammack preferred to leave the federal funds target rate unchanged. The Fed released a new summary of economic projections which suggest that the Fed expects fewer rate cuts in 2025. The median projection of Fed rate cuts in 2025 is now for two additional rate cuts next year down from their previous projection of four rate cuts. We expect only one additional rate cut in 2025.
• A January rate cut should not be expected by markets; we look for the Fed to be much more deliberative and remain in a data dependent holding pattern as it pertains to future rate cuts.
• Fed inflation projections for 2025 increased from 2.1% in the September forecast to 2.5% in today’s release.

• January 29 | March 19* | May 7 | June 18* | July 30 | September 17* | October 29 | December 10*
  

  *Indicates the meeting is associated with a summary of economic projections. In addition, every meeting will be accompanied by a press conference.

Forecasts and targets are based on certain assumptions and on views of market and economic conditions which are subject to change.

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