Fed cuts interest rate by 25 basis points as expected

The US Federal Reserve cut interest rates on Wednesday and signaled it will slow the pace at which borrowing costs fall any further given a relatively stable unemployment rate and little recent improvement in inflation.

“Economic activity has continued to expand at a solid pace” with an unemployment rate that “remains low” and inflation that “remains somewhat elevated,” the central bank’s rate-setting Federal Open Market Committee said in its latest policy statement.

*In considering the extent and timing of additional adjustments to the target range … the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” it said in new language that sets up a likely pause to rate cuts beginning at the Jan. 28-29 meeting.

U.S. central bankers now project they will make just two quarter-percentage-point rate reductions by the end of 2025.

That is half a percentage point less in policy easing next year than officials anticipated as of September, with Fed projections of inflation for the first year of the new Trump administration jumping from 2.1% in their prior projections to 2.5% in the current ones – well above the central bank’s 2% target.