Inflation Drives Federal Reserve's Decision to Lower Interest Rates
Inflation Drives Federal Reserve's Interest Rate Cuts
The Federal Reserve on Wednesday cut its benchmark interest rate by 0.25 percentage points, bringing the federal funds rate to its lowest level in over three years. The cut lowers the federal funds rate, which determines bank lending rates, to between 3.5% and 3.75%. This marks the third consecutive rate cut since September, totaling 0.75 percentage points this year.
Job Market and Inflation Monitoring
Despite the absence of significant government economic data due to the recent U.S. government shutdown, the Fed is closely monitoring the slowdown in job growth paired with rising inflation. Figures from ADP indicated that businesses shed 32,000 jobs in November, highlighting ongoing challenges in the labor market.
Outlook for Future Rate Cuts
In the announcement, the Federal Reserve indicated that it may require more economic evidence to justify additional rate cuts in 2026. In quarterly projections released alongside their latest statement, Fed officials suggested they anticipate lowering rates just once next year.
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