The Federal Reserve is poised to lower its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points, according to futures market traders. This would take the target range down to 4.25% to 4.5%. The decision is seen as a near certainty, with 93% of respondents in a CNBC survey expecting a cut.
Former Kansas City Fed President Esther George expressed caution, stating that policymakers should wait and see how data comes in before making a decision. She noted that the Fed’s preferred inflation gauge ticked higher in November to 2.5%, indicating that inflation remains above target.
Fed officials who support rate cuts argue that policy does not need to be restrictive in the current environment, but they also want to avoid damaging the labor market. If the Fed follows through on the cut, it would mark a full percentage point reduction since September.
The committee’s decision will be closely watched, particularly Powell’s news conference and the updated dot plot matrix. Markets expect little to no change in the postmeeting statement, with most forecasters seeing the Fed raising its expectations for inflation and reducing rate-cut expectations in 2025.
Other actions on tap include a possible adjustment to the interest rate paid on the overnight repo operations by 0.05 percentage points. The “ON RPP” rate acts as a floor for the funds rate, currently at 4.55%, while the effective funds rate is 4.58%.
Source: https://www.cnbc.com/2024/12/17/the-fed-has-a-big-interest-rate-decision-coming-wednesday-heres-what-to-expect.html