Breaking News: U.S. Federal Reserve Projects Interest Rate Cuts to Reach 4.25%-4.50% by Year-End, Unemployment on the Rise
In a surprising turn of events, U.S. central bankers have announced that they anticipate the need to lower interest rates to a range of 4.25%-4.50% by the end of the year. This is higher than their previous projections in June, as inflation is approaching their 2% target and unemployment rates are on the rise.
The Federal Reserve's new economic projections, released at the end of its Sept. 17-18 meeting, suggest that policymakers expect quarter-point rate cuts at the last two meetings of the year in November and December. The current target range for the short-term borrowing benchmark is 4.75%-5.00%.
Looking ahead to 2025, policymakers foresee a policy rate of 3.4%, indicating the possibility of four quarter-of-a-percentage-point cuts next year. This marks a significant shift from the previous projections in June, where only one quarter-point reduction was anticipated for 2024.
The decision to cut rates was made in light of progress towards the Fed's inflation goal and with risks to their mandates now considered "roughly in balance." However, not all policymakers were in agreement, with Fed Governor Michelle Bowman dissenting and advocating for a smaller quarter-point cut.
While the projections represent individual policymakers' views rather than a consensus, it is clear that there is a divergence of opinions within the Fed. Some believe that no further rate cuts are necessary this year, while others foresee the need for additional cuts beyond the median view.
In conclusion, the Fed's decision to lower interest rates and adjust economic projections can have significant implications for the economy, inflation, and financial markets. Investors and consumers alike should closely monitor these developments to make informed decisions about their finances and investments.