The latest meeting minutes from the U.S. Federal Reserve indicate that the central bank plans to lower interest rates “gradually” in coming months.
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Fed officials expressed confidence that inflation is easing and the labor market remains strong, ideal conditions that clear the way for further interest rate cuts. The meeting summary contained several statements that showed central bank officials are comfortable with the current rate of inflation in the U.S.
The latest reading of the Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation, showed that consumer prices in America rose an annualized 2.3% in October. While the October inflation rate was inline with the expectations of economists it is above the Fed’s 2% annualized target.
Complicating Factors
The meeting minutes also show that the Federal Reserve anticipates further interest rate cuts ahead, though how aggressively rates come down was not indicated. The U.S. central bank last voted unanimously to lower its benchmark Fed Funds Rate on November 6 by 25-basis points, taking the target range to 4.50%-4.75%.
Futures traders are currently betting about 60% in favor of another 25-basis point rate cut when the Fed next makes a decision on interest rates December 18. However, concerns are growing that president-elect Donald Trump’s plans for tax cuts and tariffs will reignite inflation and put off further interest rate cuts.
Financial markets are currently pricing in a total of 75-basis points in interest rate reductions during 2025.
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