Fed Signals Slowed Rate Cuts Amid Stable Economy

The U.S. Federal Reserve has cut interest rates and signaled a slower pace for future reductions. Stable unemployment and moderate inflation contribute to the decision. Fed projections indicate further modest cuts by 2025. Political uncertainty with Trump complicates the economic outlook.

The U.S. Federal Reserve announced a cut in interest rates on Wednesday, but signaled a slowing pace of further reductions due to a stable unemployment rate and moderate inflation levels. The Federal Open Market Committee noted that economic activity continues to expand robustly, with unemployment remaining low and inflation slightly elevated.

In a statement, the Committee revealed plans to scrutinize incoming data and economic risks, setting up a likely pause in rate cuts at its January 28-29 meeting. Projections now indicate just two quarter-point cuts by the end of 2025, marking a slowdown compared to previous expectations.

The policy shift coincides with political uncertainty following President-elect Donald Trump's election win, with Fed staff considering potential impacts of his proposed economic policies. Despite this, growth is projected to remain above potential next year, with inflation exceeding the target until 2027.

(With inputs from agencies.)