The US Federal Reserve cut interest rates by 0.25% but signaled caution about future rate cuts due to persistent inflation concerns and potential economic shifts under President-elect Donald Trump’s policies, Reuters reports.
Fed Chair Jerome Powell suggested that economic conditions under a potential Trump administration, including promised tariffs and tax cuts, could lead to slower inflation progress and fewer rate cuts next year. The Fed’s new forecasts anticipate just two rate cuts by the end of 2025, half of what was previously expected, reflecting concerns about inflationary pressures and uncertainty around Trump’s policies. The Fed revised its inflation outlook upward, projecting core inflation to remain at 2.5% through 2025, higher than the Fed’s target of 2%.
The Fed’s decision to ease rates was not unanimous, with Cleveland Fed President Beth Hammack dissenting, preferring to keep rates unchanged. The central bank’s updated projections suggest persistent inflation, which is not expected to return to the 2% target until 2027.
