Fed cuts by a quarter point, indicates fewer reductions ahead

Published On Dec 18, 2024, 2:00 PM

The Federal Reserve has cut interest rates by 25 basis points, marking the third consecutive rate cut and lowering the target range to 4.25%-4.5%. This decision is accompanied by a cautious outlook for future reductions, with projections indicating two more cuts in 2025. The Fed acknowledges that while inflation remains above target, economic growth is solid. The latest adjustments in GDP growth and inflation estimates suggest a complex economic environment where monetary policy must be carefully calibrated to avoid stifling growth.

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Investors might see the reduction in interest rates as a positive signal for growth and borrowing. Historically, lower rates can lead to increased consumer spending and corporate investment, which can benefit various sectors, including real estate and consumer discretionary. However, the caution indicated by the Fed regarding future cuts also points to potential economic uncertainties. Investors should be strategic in selecting sectors that are sensitive to interest rate changes.

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