The US Federal Reserve (Fed) acted in line with market expectations by reducing interest rates by 25 basis points, completing 2024 with a cumulative 100 basis point reduction. Despite persistent inflation above expectations, US growth remaining around 3%, and a strong labor market, the Fed continued its rate cuts. Headline inflation in the US has risen in the past three months, increasing from 2.4% to 2.7%, while core inflation has stayed above 3% for 43 consecutive months. In light of these factors, many analysts, including some former and current Fed branch presidents, argued that raising interest rates or at least maintaining the current levels would have been more appropriate. Esther George, former head of the Fed's Kansas branch, notably stated that there should be no interest rate reduction at this time. However, these dissenting views did not prevent the Fed from moving forward, and the institution ended the year with a 100 basis point reduction after previous cuts of 50 basis points in September and 25 basis points in November. The probability of the Fed keeping rates unchanged in January is now 90%, as indicated by futures markets. Additionally, the Fed's dot plot was interpreted as "hawkish," signaling reduced expectations for monetary expansion in 2025. The decision to cut rates was made with 11 votes in favor and 1 against, with Fed Cleveland President, Loretta Mester, dissenting, advocating for the rates to remain fixed.

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