Not long ago, when inflation continued to cool and the job market was slowing down, it looked like the Federal Reserve was getting set for a series of interest rate cuts.
In September, after the first rate cut in years, Fed officials appeared to indicate more cuts were coming – three this year and as many as four next year.
Now? Not so much.
With several strong economic reports and an expected shift in economic focus from incoming President Donald Trump, the Fed’s leanings are a little different, according to a report from The Associated Press.
According to the AP report, that shift could mean fewer cuts are coming, likely bringing higher interest rates, continued high mortgage rates and other borrowing costs for consumers and businesses. Auto loans would remain expensive. Small businesses would still face high loan rates.
In a speech last week in Dallas, the AP reported, Chair Jerome Powell indicated the Fed board, which meets every six weeks, isn’t necessarily going to reduce rates after each meeting.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Recent economic data suggests inflation pressures could prove more persistent and economic growth more resilient than was thought just a few months ago, the AP reported. At his most recent news conference, Powell suggested that the economy could even accelerate in 2025.
Wall Street traders and some economists now envision just two, rather than four, rate cuts next year. And while the Fed will likely cut its key rate when it meets in mid-December, traders foresee a nearly even likelihood that the central bank could leave the rate unchanged.
“I absolutely would anticipate that they’ll ease up on the pace of cuts,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, told the AP. “The potential for growth to remain strong — that has to call into question whether they will feel either the need or ability to cut rates at the pace they had previously forecast.”
