Fed 'dot plot' shows central bank will cut interest rates two more times in 2025

Published On Dec 18, 2024, 2:27 PM

The Federal Reserve announced a reduction in interest rates at their last meeting of the year, lowering them to a range of 4.25%-4.5%. The new Fed projections suggest that interest rates will fall to 3.9% by 2025, reflecting a more conservative approach compared to previous forecasts. This indicates a potential for two more cuts in 2025 and further adjustments in 2026, depending on inflation and economic growth. The Fed maintains its dual mandate of price stability and maximum employment amidst shifting economic conditions, including a modest increase in the unemployment rate to 4.3%. Core inflation is projected to peak at 2.5%.

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Stock Forecasts

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Positive

The market appears to favor the Federal Reserve's cautious strategy, as interest rate cuts typically stimulate borrowing and spending, which can boost stock prices. Companies that are sensitive to interest rates, particularly in the consumer discretionary and technology sectors, may see stronger performance as borrowing costs decline. Overall, the sentiment is likely positive given the supportive economic outlook.

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