The Federal Reserve signaled a cautious approach to rate cuts during its December 17-18 meeting, citing slower progress in reducing inflation. Meeting minutes revealed concerns about the disinflationary process stalling, with some price readings exceeding expectations. Policymakers emphasized the need to adjust the pace of monetary policy more gradually, aiming to reach the 2% inflation target.
The Federal Open Market Committee (FOMC) reduced the benchmark rate to 4.25%-4.5% during the meeting, marking a third consecutive cut. However, this "hawkish cut" reflected reduced expectations for further rate cuts in 2025. While most participants supported the decision, one member voted against it, highlighting divided opinions on policy adjustments.
Fed members projected inflation would take longer to stabilize at 2% and scaled back their outlook for 2025, predicting only two rate cuts instead of the previously anticipated four. This tempered outlook comes as economic indicators, like the ISM services survey, suggest renewed price pressures.
Despite concerns, Fed Governor Christopher Waller expressed optimism on Wednesday, reiterating his expectation for continued inflation declines. He assured that rate cuts remain feasible if disinflationary trends persist.
Traders now anticipate a policy pause until June, according to Investing.com’s Fed Rate Monitor Tool.


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