The Fed has cut rates by 25BPS

The interest rate has been reduced by 25 basis points, bringing it to a range of 4.50% to 4.75%. This comes after a larger 50-basis-point cut in September, which lowered the rate from its peak of 5.25%-5.50% for much of 2024.

The Fed began reducing rates in September to stimulate the economy amid cooling inflation and a softening job market. Prior to this, the Fed had raised rates over two years to combat inflation, which had peaked at 9.1% in June 2022. Since then, inflation has dropped to 2.4%, moving closer to the Fed’s 2% target.

In a speech in September, Fed Chair Jerome Powell suggested that an additional 25-basis-point cut could be possible before 2025 if economic conditions remain steady.

The Fed projects that the benchmark rate will decline to 3.4% by the end of 2025, which would further reduce borrowing costs.