Following its latest Federal Open Markets Committee (FOMC) meeting on Dec. 18, the U.S. Federal Reserve lowered its benchmark interest rate by a quarter point, citing further expansion in economic activity.

It matched the size of the Fed’s rate cut from November, and puts the central bank’s borrowing rate at 4.25% to 4.50%.

“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said in its latest FOMC statement. “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.”

With the Dec. 17-18 FOMC meeting being its last of 2024, the Fed issued its projections of the most likely outcomes for real GDP growth, the unemployment rate, inflation and “appropriate monetary policy” for the Fed funds rate for inflation for each year from 2024 to 2026 and over the longer run. The results show that the group projects interest rates — which had a 4.4% median in 2024 — will be at 3.6% in 2025; 3.4% in 2026; 3.1% in 2027; and 3.0% for the longer run.

The Fed’s next FOMC meeting is set for Jan. 28-29.

U.S. Fed Funds Interest Rate

source: tradingeconomics.com