The Federal Reserve cut its benchmark interest rate by a quarter percentage point Wednesday, lowering it to 4.25%-4.50%, while signaling a cautious approach to future reductions. Fed Chair Jerome Powell emphasized that further rate cuts depend on substantial progress in reducing inflation, which remains above the central bank’s 2% target.
“From here, it’s a new phase, and we’re going to be cautious about further cuts,” Powell said, citing inflation’s “sideways” movement and slow improvement in shelter costs. Wall Street reacted with sharp declines in stocks, rising bond yields, and reduced expectations for rate cuts next year.
The Fed’s revised projections reflect higher inflation estimates under President-elect Donald Trump’s proposed policies, including tariffs and tax cuts. Inflation is now forecasted at 2.5% through 2025.
Cleveland Fed President Beth Hammack dissented, favoring no rate change. Powell stressed uncertainty around Trump’s policies but pledged to navigate inflation risks carefully while supporting economic growth.
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