Fed Faces Balancing Act: Navigating Slower Rate Cuts Amid Economic Uncertainty

The Federal Reserve is easing its pace of interest rate cuts. Officials indicate fewer rate reductions in 2025, responding to lingering inflation and economic growth. President-elect Trump's policies introduce further uncertainty, as Americans face persistent borrowing costs.

The Federal Reserve is expected to signal a slower pace of interest rate cuts next year, affecting Americans facing high borrowing costs on mortgages, auto loans, and credit cards. The Fed plans a quarter-point cut to its key rate, shifting from a more aggressive strategy of recent months.

This potential shift highlights the transition to alternative cutting patterns, aiming to lower rates two or three times annually instead of quarterly. It's a reaction to reduced inflation, which stood at 2.3% in October. However, ongoing robust economic growth and persistent inflation above the 2% target complicate matters.

President-elect Donald Trump's policy proposals further muddy the waters. From tax cuts to tariffs, these initiatives may boost growth and inflation. Jerome Powell and other officials remain cautious, pending clarity on these factors' impacts. Ultimately, low borrowing costs are unlikely soon, with mortgage rates steadying at 6.6%, far from the historic lows seen pre-pandemic.

(With inputs from agencies.)