The US Federal Reserve (#FED ) acted in line with the market expectations and reduced interest rates by 25 basis points. Thus, the institution completed 2024 with a 100 basis point reduction.
The #US Federal Reserve (Fed) did not surprise the markets and continued to reduce interest rates by 25 basis points. Inflation that remained above expectations, the US growth rate being around 3% and the strong labor market could not prevent the institution from reducing interest rates.
As is known, headline inflation in the US has also increased again in the last 3 months and increased from 2.4% to 2.7%. Core inflation has also been above 3% for 43 months.
Due to these situations, many analysts and even some former and current branch presidents of the Fed stated that it would be more appropriate to increase interest rates or at least not to reduce them. Finally, Esther George, former head of the Fed Kansas branch, said, “At least there should be no interest rate reduction.”
However, all these comments did not slow down the institution. The Fed has completed the year with a 100 basis point reduction following its 50 basis point reductions in September and 25 basis point reductions in November.
The probability of “fixed” in January was 90 percent
On the other hand, the Fed dot graph was interpreted as “hawkish”. Expectations for monetary expansion in 2025 in swap markets have decreased. The decision to cut interest rates was made by 11 votes to 1. Fed Cleveland President Dissented said, “Let interest rates be kept fixed.” Fed interest rate futures are pricing the probability of keeping interest rates fixed in January as 90 percent.