Fed's Interest Rate

As of December 17, 2024, the Federal Reserve (Fed) has implemented a series of interest rate cuts in response to evolving economic conditions. These adjustments aim to balance economic growth with inflation control, particularly in light of President-elect Donald Trump's anticipated policies.

Recent Rate Cuts and Economic Indicators

In September 2024, the Fed reduced its benchmark interest rate by 50 basis points, marking the first cut since 2020. This decision was influenced by easing inflation and a weakening job market.

Wikipedia

Subsequently, the Federal Open Market Committee (FOMC) convened in November 2024, maintaining the federal funds rate at 4.50%–4.75%.

Wikipedia

The U.S. economy concluded 2024 robustly, with a 2.7% increase in GDP driven by consumer spending and productivity growth. Forecasts predict mid-2% growth for 2025. The labor market remains strong, with low unemployment and wage growth surpassing inflation. Inflation remains above the Fed's 2% target, primarily due to housing costs, and is expected to linger in the mid-2% range in 2025.

Barron's

Anticipated Policy Adjustments

The Fed is expected to announce another quarter-point rate cut, their third this year, aimed at mitigating inflation, currently at 2.7%, above their 2% target.

New York Post

Additionally, the Fed is expected to make a technical tweak by lowering the rate for cash parked overnight at the reverse repo facility by 0.5 basis points to 4.25%. This adjustment aims to prevent market funding shocks and continue quantitative tightening (QT) through the first quarter of 2025.

MarketWatch

Market Reactions and Investor Sentiment

The Dow Jones Industrial Average has experienced a significant downturn, extending its longest losing streak since 1978. This decline is attributed to diminishing expectations of aggressive interest rate cuts by the Fed in 2025.

New York Post

Despite the Fed's rate cuts, bond prices have declined in recent weeks, and long-term bonds have not experienced a rally. The 10-year Treasury yield has increased, impacting bond fund returns.

Barron's

Considerations for Future Monetary Policy

The Fed's decisions are further complicated by the incoming Trump administration's proposed policies, including tariffs and immigration reforms, which could influence inflation and economic growth. Policymakers are cautious about making premature projections regarding these policies and emphasize the need to observe their actual impacts before making significant adjustments.

The Wall Street Journal

In conclusion, as of December 17, 2024, the Federal Reserve continues to navigate a complex economic landscape, implementing measured interest rate cuts to balance growth and inflation. The interplay between monetary policy and anticipated fiscal measures under the Trump administration will be pivotal in shaping the U.S. economic trajectory in the coming year.

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