Fri Dec 20 03:11:52 UTC 2024: ## Fed Cuts Rates Again, Signaling Slower Pace of Cuts in 2025

**NEW YORK, December 19, 2024** – The Federal Reserve (Fed) announced a 25-basis-point interest rate cut on Wednesday, lowering the target range to 4.25% to 4.5%. This marks the third consecutive rate cut, following reductions in November and September. While the initial market reaction was negative, with equities dropping nearly 3%, markets rebounded by Thursday.

The decision, however, signaled a shift in the Fed’s approach. The accompanying statement introduced a qualifier suggesting a slower pace of rate cuts in 2025 than previously anticipated. The Summary of Economic Projections (SEP) now projects only two 25-basis-point cuts in 2025, down from four projected in September. This revised outlook reflects stronger-than-expected economic growth, with upward revisions to 2025 year-end growth and core inflation projections. The unemployment rate was also revised downward.

Fed Chair Jerome Powell, in his press conference, addressed concerns about the impact of President-elect Donald Trump’s proposed policies. He stated that while the Fed is modeling these proposals, they are not yet incorporated into its decisions due to uncertainty surrounding their implementation. Powell emphasized that the Fed’s monetary policy decisions will continue to be data-driven, made on a “meeting-by-meeting” basis.

Despite the rate cut, Powell highlighted the strength of the current economy and stressed the Fed’s commitment to achieving its dual mandate of maximum employment and price stability. He indicated that the Fed will proceed cautiously, carefully balancing the risks of moving too slowly and undermining economic activity against the risk of undermining progress on inflation. J.P. Morgan Wealth Management analysts anticipate the Fed may hold rates steady in January, continuing to assess incoming economic data. They expect a gradual easing of monetary policy in 2025 to support the cooling labor market.

**Analyst Commentary from J.P. Morgan Wealth Management:** The slight market correction following the rate cut is seen as a positive, bringing equity valuations to a more realistic level. Given the continued economic expansion and stubborn inflation, the firm advises investors to focus on assets offering a defensive posture and diversified income streams.

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