The Federal Reserve proposes a decrease in the third price this year, and suggests less in 2025

On Wednesday, the Federal Reserve is committed to reducing the final interest rate this year, as expected widely by economists and investors, but he suggested less discounts next year.

The Federal Open Market Committee (FOMC) reduced a quarter of a point to a target range from 4.25 % to 4.5 %, which represents a third consecutive reduction in 2024. The market expectations. In the aftermath of the news, American stocks slipped to one of the worst days of the year, as the average Dow Jones industrial lost 1123 points and published the first 10 -day loss series since 1974.

Despite the expected reduction, concerns are constantly related to inflation and the potential effect of Trump administration policies. Federal Reserve Chairman Jerome Powell, addressing journalists in Washington, DC, climbed a cautious tone in his observations.

He said: “The recent indicators indicate that economic activity continued to expand at a strong pace.” Quoted from GDP by 2.8 % in the third quarter and elastic consumer spending. “The pace of slow discounts for the next year really reflects both the high inflation readings that we have passed this year, and inflation will be higher.”

At the December meeting, the market expectations were almost unanimously, with about 9 out of 10 economists included in FactSet Predicting another pieces. However, expectations for 2025 are still less confident, with some analysts expanding their expectations to reduce prices in the future.

Others expected a “Hot discussion” At the FOMC meeting for two days, given that the economy is working better than expected.

“The economy thought stronger than the meeting that it would be when they started to break in September, while the improvements in inflation have stopped,” Diane Sonk, chief economist at the KPMG Accounting CompanyShe wrote on a preview note for her the Federal Reserve meeting. “Some of this may be a response to recent hurricanes and the rise in alternative demand, but it confirms our exposure to the disturbances in the supply chain and demand shocks.”

It is worth noting, there was Fourth liquid deficiency In hospitals since late September, Hurricane Helen affected the North Carolina state factory responsible for 60 % of the fourth fluid supply.

The economic scene offers a mixed image. Service sector flourishes, as the Global Flash Us PMI rises to 56.6 in December, indicating the fastest expansion of commercial activity since March 2022. However, manufacturing tells a different story, with a decrease in production sharply due to poor demand for export.

This division emphasizes the challenges facing the Federal Reserve because it moves on conflicting economic signs.

The risk of inflation continues on the horizon. The consumer price index increased in November by 2.7 %, which exceeded the goal of the Federal Reserve by 2 %. This continuous inflationary pressure, along with possible political transformations under the incoming administration, prompted some economists to predict a more cautious approach than the federal reserve next year.

Analysts say inflation can somewhat prepare in the high rates of background, as inflation can wander due to a number of economic factors and geopolitical risks.

“It is not necessarily necessary for the return of inflation to be linked to monetary policy, as there are a number of reasonable risks to inflation expectations: the escalation of any of the continuous geopolitical conflicts can push the prices of commodities up. Lawrence Nelson, the main economist at the S& P Global Markt Intelligence, said that imposition High tariff rates by the United States can pay revenge definitions abroad, which pays the costs of all kinds of elements higher.

“Regardless of the reason, the Federal Reserve will bear a lot of blame for the return of inflation, and inflation will rise. To restore its credibility, the Federal Reserve will have to impose a more restriction policy than they did during the initial inflation battle, the US economy turns into Painful recession until the inflation returns to 2 %.

With economic uncertainty on the horizon, Powell and his colleagues in the Federal Reserve face the sensitive important task of achieving a balance between stimulating growth against inflationary risks next year.

“The Federal Reserve cannot announce an enlarged victory until the plane landed, and the passengers and the plane explode in a fold. Swank, KPMG economist, told Salon:“ We are anywhere near that now. ”You can see this in the reserve expectations Federal, it’s a very slow process. “