The Federal Reserve (Fed) has acted in line with market expectations and cut interest rates by 25 basis points. Thus, the organization completed 2024 with a total reduction of 100 basis points.
The Federal Reserve (Fed) did not surprise the market and continued to cut interest rates by 25 basis points. Inflation remains higher than expected, U.S. growth rate is around 3%, and a strong labor market could not deter this organization from cutting interest rates.
As is known, headline inflation in the U.S. has also increased again over the past 3 months, rising from 2.4% to 2.7%. Core inflation has also exceeded 3% for 43 months.
Due to these circumstances, many analysts and even some former and current presidents of Fed branches have stated that it would be more reasonable to raise interest rates or at least not cut them. Ultimately, Esther George, former director of the Fed Kansas branch, said: 'At least there should be no interest rate cuts.'
However, all these comments did not slow the organization's progress. The Fed completed the year with a 100 basis point cut after a 50 basis point cut in September and a 25 basis point cut in November.
The probability of 'holding' in January is 90 percent
On the other hand, the Fed's dot plot is interpreted as 'hawkish'. Expectations for monetary expansion in 2025 in the swap market have declined. The decision to cut interest rates was passed with 11 votes in favor and 1 against. The President of the Fed Cleveland disagreed and said: 'Let's keep interest rates stable.' Fed interest rate futures are pricing in a 90 percent probability of keeping interest rates stable in January.
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