Adds Powell comments, projections.
The US Federal Reserve cut its target interest rate by 25 basis points today, its third cut of the year, and signaled it was likely to slow its pace of rate cuts by half next year from prior projections to maintain progress in bringing down inflation.
"We are looking for further progress on inflation as well as continued strength in the labor market," Fed chair Jerome Powell told reporters. "As long as the economy and labor market are solid, we can be cautious as we consider further cuts."
The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.25-4.50pc from the prior range of 4.5-4.75pc. This followed a quarter point reduction in November and a half-point cut made in mid-September, the first cut since 2020.
The Fed penciled in 50 basis points worth of cuts for 2025, down from 100 basis points projected in the September median economic projections of Fed board members and Fed bank presidents.
Projections show Personal Consumption Expenditure (PCE) inflation ending 2025 at 2.5pc, higher than the 2.1pc projected in September. PCE inflation is seen ending 2024 at 2.4pc, slightly up from 2.3pc projected in September. Headline consumer prices topped out above 9pc in mid-2022.
The unemployment rate is projected to end 2025 at 4.3pc, slightly lower than the 4.4pc projected in September. GDP is projected to slow to an annual 2.1pc growth at the end of next year, slightly up from the 2pc projected in September.
Unemployment is expected to end 2024 at 4.2pc and GDP growth at 2.5pc.
