- Stocks Dip as US Federal Reserve Signals Slower Rate Cuts in 2024
- Economic projections indicated a slower pace of cuts in the coming year
- The Federal Reserve lowered its key lending rate to a target range of 4.25% to 4.5%.
Stocks Dip as US Federal Reserve Signals Slower Rate Cuts in 2024
US stock prices took a hit after the Federal Reserve announced its third consecutive interest rate cut, but its economic projections indicated a slower pace of cuts in the coming year.
In a move that was widely anticipated, the Federal Reserve lowered its key lending rate to a target range of 4.25% to 4.5%. This marks a one percentage point drop since September when the central bank first began reducing borrowing costs. The Fed’s decision reflects progress in stabilising prices and a desire to prevent an economic slowdown.
However, recent reports show that the job market has remained stronger than expected, and inflation continues to be persistent, with prices still rising. This has led to concerns that inflation could persist longer than initially forecast.
Stocks saw a sharp decline after Federal Reserve Chairman Jerome Powell signalled that fewer rate cuts would likely occur next year due to ongoing inflationary pressures. Analysts also pointed to potential economic challenges, including policies from President-elect Donald Trump that could add inflationary pressure. These policies include proposed tax cuts and import tariffs, which could drive prices higher.
The Federal Reserve’s decision to lower borrowing costs may increase demand by making it easier for businesses and households to borrow and spend. However, with higher demand, inflation is often a natural consequence, which could slow down the Fed’s ability to lower rates further in 2024.
