Fed cuts rates by quarter point, scales back cuts for 2025

Published On Dec 18, 2024, 2:01 PM

The Federal Reserve has decided to cut interest rates by a quarter percentage point to a new range of 4.25%-4.5% in response to ongoing economic conditions, marking its third consecutive rate cut of 2024. Although there are signals of persistent inflation, the Fed has revised its forecast, projecting three rate cuts for the next year, down from four previously anticipated. Factors influencing this decision include a stable job market and inflation trends that have remained higher than expected. The Fed's updated guidance reflects cautious optimism about economic growth, with forecasts of inflation for the year-end revised up to 2.8%.

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Stock Forecasts

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SPY View SPY chart on TradingView

Positive

The Fed's decision to cut rates indicates a supportive environment for growth in sectors sensitive to interest rates, particularly consumer spending and borrowing. However, the reduced number of expected cuts suggests a more measured approach to monetary policy, which could temper expectations for aggressive growth in some sectors.

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Negative

Conversely, sectors dependent on high interest rates, such as financial services, may face challenges as reduced rates typically compress net interest margins for banks and financial entities.

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