Federal Reserve's Upcoming Interest Rates Decision Amid Ongoing Inflation Battle

Interest Rates to Be Reduced as Inflation Persists

The Federal Reserve is poised to announce its final interest rate decision of 2024 this Wednesday. Following a year of fluctuation, this marks the central bank's commitment to alleviating the financial strain on borrowers by implementing its first rate cut in four years back in September. Economists surveyed by FactSet predict that on December 18, the Fed will likely initiate its third consecutive rate cut for 2024. However, many experts are preparing for a gradual reduction pace in 2025 due to the nation’s persistent inflation readings and potential economic policies proposed by President-elect Donald Trump, which, if enacted, could exacerbate inflation.

Continued Inflation Challenges for the Federal Reserve

Since March 2022, the Federal Reserve has been actively countering inflation by steadily increasing rates, successfully raising its benchmark rate to its highest level in 23 years. Although inflation rates have decreased significantly since then, the Consumer Price Index in November recorded a rise of 2.7%, indicating a persistent challenge to achieve the Fed's inflation target of 2% annually.

This ongoing struggle suggests that the fight against inflation is far from over. Nevertheless, the November inflation data fell within economists' forecasts. Compounding these concerns, the unemployment rate has also seen a slight uptick this year, raising alarms for the Fed regarding potential weaknesses in the labor market. This situation has facilitated the recent rate reductions, as noted by economic analysts.