Dec 18, 2024 10:17 PM IST
The US Fed will likely lower borrowing costs for a third-straight meeting this week while also signalling fewer interest-rate cuts next year.
The US Federal Reserve Chairman Jerome Powell will announce key policy decisions on Thursday after a two-day Federal Open Market Committee (FOMC) meeting.
The meeting assumes significance as the United States heads into Donald Trump’s presidency from January 20, 2025.
What to expect?
The US Central Bank is expected to cut benchmark rates by a quarter percentage point. This move would bring the central bank’s lending rate to 4.25% to 4.5%, from the current 4.5% to 4.75%. This would also leave the benchmark rate above the 2.9% median estimate, where the rates are expected to settle in the long term.
Experts would also watch for the central bank’s language in its post-meeting policy statement. The Fed is expected to signal fewer interest-rate cuts next year than projected.
“As you get closer to the upper bound of those estimates, it makes sense from the Fed’s perspective to move more slowly as it assesses where it is in the policy cycle,” Tim Duy, chief US economist for SGH Macro Advisors, told Bloomberg.
The report also noted that falling inflation and a slowdown in the weakening of the labour market could prompt the Fed to announce the rate cut. This means policymakers may upgrade their outlooks to show higher inflation, lower unemployment and stronger economic growth in their updated forecasts for 2024.
Better-than-expected economic data on whether the Fed’s neutral rate is now higher. The neutral rate is when the central bank is neither boosting nor slowing down the economy through its policy actions.
When the Fed reduces interest rates, it typically refers to the federal funds rate, the interest rate at which banks lend to each other overnight. This key interest rate influences overall economic activity and is a fundamental tool for monetary policy.
Where to watch the meeting live?
The press conference can be watched live on the US Federal Reserve’s official website at federalreserve.gov/live-broadcast.htm. It will also be telecast on the central bank’s YouTube channel and other social media platforms.