US Fed rate cut
US Fed Rate Cut: The US central bank Federal Reserve has cut the key interest rate. The Federal Reserve decided to cut the interest rate by 0.25 percent late on Wednesday night. The US Fed has cut interest rates for the third consecutive time. The Fed reduced the federal funds target rate range by 0.25% to between 4.25% and 4.5%. At the same time, the reverse repo rate has been reduced from 4.55% to 4.25%, which is a reduction of 0.30%. The US central bank said, ‘Recent signals suggest that economic activity continues to expand at a solid pace.’ The Fed acknowledged that inflation remains somewhat high. The reaction of investors on this decision of Fed will be seen in the Indian stock market today.
Labor market situation improved
“Labor market conditions have generally improved since the beginning of the year. The unemployment rate has increased, but remains low. Inflation has moved toward the 2% target, but some “Remains quite high.” The Fed chairman said the risks to achieving employment and inflation targets are “roughly balanced.” Inflation has risen in the US over the past few months, reducing expectations on the number of interest rate cuts in the next year.
Investors got a shock here
Investors were expecting a significant rate cut in the year 2025. But now these hopes have suffered a setback. The Fed’s forecast for the upcoming rate trajectory calls for only two 0.25% rate cuts in 2025. Earlier four times 0.25 percent rate cut was expected. The central bank has also increased its inflation forecast for the next year. It has been increased from 2.1 percent to 2.5 percent.
What will be the interest rate by the end of 2025?
Analysts had already predicted the Fed would signal a slowing of the pace of interest rate cuts next year as inflation has surged in recent days. In such a situation, there is a need to keep the rates high for some more time. With the recent rate cut, the Fed has reduced interest rates by a full 1 percent this year. According to current estimates, the Fed sees the key interest rate in the range of 3.75-4% through the end of 2025.
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