The Fed Cuts Interest Rates by 25 Basis Points at the End of 2024

The United States Federal Reserve (The Fed) cut its benchmark interest rate by 25 basis points (bps) to 4.25%–4.50% in December 2024. This decision was made during a meeting held on Wednesday, December 18-19, 2024, local time.

*Katadata* reported that this is the third interest rate cut since the Fed began lowering borrowing costs in September 2024. The Federal Open Market Committee (FOMC)'s decision returned the rate to the level seen in December 2022, before rates began to rise.

The Fed reasoned that the cut was made due to indicators showing the economy continuing to grow at a solid pace.

"Since the beginning of the year, labor market conditions have generally improved, and the unemployment rate has risen but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated," the Fed wrote in its official release on Wednesday, December 18, 2024.

The Fed added that the Committee is seeking to achieve maximum employment and 2% inflation in the long run.

"The economic outlook is uncertain, and the Committee is attentive to risks on both sides of its dual mandate," the Fed wrote.

(Read also: [The Fed Cuts Benchmark Interest Rate by 25 bps in November 2024](https://databoks.katadata.co.id/moneter/statistik/672e0f8b42c1a/the-fed-potong-suku-bunga-acuan-25-bps-pada-november-2024))

2025 Interest Rate Cut Projections

The Fed also hinted at a likely holding of interest rates in the near future, as inflation remains significantly above the central bank's 2% target.

The US economy has also shown remarkable resilience in the face of high borrowing costs, giving the Fed confidence to maintain interest rates without risking a downturn.

Fed officials forecast only two interest rate cuts in 2025. This is lower than the four cuts projected in September 2024.

The US central bank will monitor inflation developments in 2025, as some US economic data has been causing concern for markets and policymakers.

"As we consider further cuts, we will be looking at the evolution of US inflation. Because we've moved sideways in 12-month inflation," said Fed Chair Jerome Powell, as quoted by CNBC on Thursday, December 19, 2024.

(Read *Katadata*: [The Fed Cuts Interest Rate by 25 bps, But 2025 Decreases Will Be Limited](https://katadata.co.id/finansial/makro/67633f3b880fe/the-fed-pangkas-suku-bunga-25-bps-tapi-penurunan-2025-bakal-terbatas))