Fed plans another rate cut by December
The Fed cut its benchmark federal funds rate by 50 basis points to 4.75%-5% on Wednesday, the first rate cut in four years after the Fed's most aggressive rate hike cycle.
"The committee has increased its confidence that inflation is on track to 2% and judges that risks to achieving its employment and inflation goals are roughly balanced," the press release said. "The economic outlook is uncertain and the committee is concerned about the risks to its dual mandate."
Based on the Fed's quarterly economic projections, Fed members expect the median benchmark rate to fall to 4.4% by the end of the year, which means the Fed will cut rates by another 50 basis points at the next two Federal Open Market Committee (FOMC) meetings. This is an increase from the single rate cut predicted in June.
Besides the emergency rate cut during the COVID-19 pandemic, the last time the FOMC cut rates by half a percentage point was during the 2008 global financial crisis. The forecast matrix of officials also suggests another one percentage point cut by the end of 2025 and another half a percentage point cut by 2026. Overall, the dot plot shows the benchmark rate is down about 2 percentage points from Wednesday's cut.
