US Fed cuts Federal funds rate by 0.25% despite high inflation
20 Dec 2024
The Federal Open Market Committee on Wednesday announced a 0.25 per cent reduction in the target interest rate, bringing the federal funds rate to 4.25-4.50 per cent, in a move to soften the impact of the tightening of the Fed’s monetary policy, despite the high inflation level.
Fed said the decision is in line with the FOMC’s goal of supporting growth while keeping long-term inflation level below the 2 per cent upper limit. The committee has carefully assessed incoming data before considering a 25 basis point reduction in the Fed policy rate, it added.
The Fed will also continue to reduce its holdings of Treasury securities and agency debt and agency mortgage‑backed securities, the FOMC statement added.
The FOMC will adjust its monetary policy stance depending on the emerging scenario and risk perceptions, the Fed release added.
In fact, while briefing the media, Fed chair Jerome H Powell said some FOMC members even raised issues like the potential impact of the possible tariff changes by the upcoming Donald Trump regime.
The announcement of the rate cut sent both the two-year US Treasury yield and the 10-year rate higher.
The Dow Jones Industrial Average ended 1,100 points down while the S&P 500 saw its highest loss since 2001.
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