US Fed Cuts Key Interest Rate by 0.25%

By Equity Market Insights

What Happened?

– Fed cut its key interest rate to 4.25% - 4.50%. – Policymakers voted 11-to-1 in favor. – Only two cuts expected in 2025, down from four.

Market Reaction

– Wall Street: All major indices dropped sharply. – US Treasurys: Yields surged.

Why the Cut?

– Inflation remains “somewhat elevated” despite progress. – Fed Chair Powell: "We’re closer to ending the easing cycle."

Economic Forecast for 2025

– Growth: 2.1% (down from 2.5% in 2023). – Inflation: 2.5% (not hitting 2% target until 2027). – Unemployment: Slight rise to 4.3%.

Challenges Ahead

– Higher rates might stay longer. – Tariffs from incoming policies could push up inflation. – Analysts: Rate cuts might accelerate if unemployment rises.

Bottom Line

The Fed’s cautious approach balances inflation control with economic growth. Markets face uncertainty as investors adjust to new forecasts.

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