by Luzi Ann Santos | moomoo News

The Federal Open Market Committee lowered the target federal funds rate by 25 basis points and forecast a slower pace of reductions next year as policymakers raised their outlook on inflation.

The target rate was lowered to a range of 4.25%-4.5% Wednesday, the Federal Reserve said in a statement Wednesday at the end of policymakers two-day meeting. While the previous decision to lower rates was unanimous, this time around, Federal Reserve Bank of Cleveland Beth M. Hammack voted against the move, preferring instead to hold the benchmark borrowing cost steady at 4.5% to 4.75%.

The committee's so-called dot plot, which illustrates the forecast by members of the FOMC, showed the median fed funds rate outlook at 3.9%, implying expectations of two cuts of 25 basis points each, by the end of 2025. That compares with their previous median outlook that called for a rate of 3.4%.

While little has changed in the tenor of the FOMC statement, officials emphasized that "the extent and timing of additional cuts" will depend on the evolving outlook, incoming data and the balance of risks.

The personal consumption expenditures inflation was expected by policymakers at 2.5% in 2025, higher than the 2.1% they forecast in their meeting in September. Core PCE, the Fed's preferred gauge, was seen at 2.5%, up from the 2.2% previously. Unemployment rate was predicted to reach 4.3%, lower than the 4.4% in their previous summary of economic projections (SEP).

What Has Changed in the New Fed Statement

Here is a detailed comparison of the Fed's current and previous statements, providing enlightening information for your investment choices.