The Federal Reserve’s decision to lower interest rates by a quarter percentage point marks a strategic recalibration in its monetary policy. This third consecutive cut in 2024 brings the rate to a target range of 4.25%-4.5%. While the move aims to balance inflation concerns and economic growth, the Fed has signaled caution in further reductions, projecting only two cuts for 2025.
Economic indicators remain mixed. Inflation, measured by core personal consumption expenditures, remains persistently above the Fed’s 2% target, ending the year at 2.8%. Meanwhile, the unemployment rate is slightly lower than anticipated at 4.2%, and GDP growth projections have been adjusted upward for 2024. The current Atlanta Fed projection for Q4 2024 GDP is 3.1.
Despite these rate cuts, markets have reacted with skepticism. Mortgage rates and Treasury yields have climbed, suggesting doubts about the Fed’s ability to sustain significant rate reductions. Fed Chair Jerome Powell described the cuts as a recalibration, aiming to maintain economic momentum without overheating inflation.
