Fed's Gradual Shift: Slowdown in Rate Cuts Amid Inflation Concerns

The U.S. Federal Reserve has cut interest rates and plans to slow the pace of further reductions. Higher inflation and low unemployment prompt a cautious approach, with adjustments expected to pause by January 2025. Economic growth remains steady, but policy changes may arise with Trump administration uncertainties looming.

The U.S. Federal Reserve announced a rate cut on Wednesday, signaling a slowdown in the pace of future reductions. Despite steady economic growth and a stable unemployment rate, inflation concerns prompt caution as the Fed evaluates future policy adjustments. The move marks a strategic shift as inflation remains above the central bank's 2% target.

The Federal Open Market Committee outlined plans to pause rate cuts by the January 28-29 meeting, reflecting a more gradual approach amid rising inflation expectations. Fed Chair Jerome Powell and officials anticipate inflation to return to target levels by 2027, with minimal rate cuts projected in the meantime.

Market reactions included a rise in U.S. Treasury bond yields and a decline in stock prices. With Trump's impending administration introducing economic uncertainties, the Fed stays vigilant, projecting growth to remain above potential and unemployment to stay low, despite policy uncertainties.

(With inputs from agencies.)