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U.S. Federal Reserve cuts interest rate by 25 basis points

MacDailyNews

Dec 10

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On Wednesday, the U.S. Federal Reserve delivered its third interest rate cut of 2025, lowering the benchmark federal funds rate by 25 basis points to a new target range of 3.5%–3.75%. The decision, aimed at supporting a gradually softening labor market, follows identical quarter-point reductions in September and October — the first cuts since the tightening cycle began. With this latest move, the Fed has now eased policy by a total of 75 basis points this year while signaling a more gradual pace of reductions ahead.

Eric Revell for FOX Business:
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The Federal Open Market Committee (FOMC), which handles the Fed’s monetary policy decisions, voted to cut by 25 basis points with the support of nine policymakers with three dissenters. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid dissented in favor of leaving interest rates unchanged, while Fed Governor Stephen Miran dissented in favor of a larger 50 basis point cut.
Fed Chair Jerome Powell said that while important government data have been delayed due to the historic government shutdown that ended in mid-November after 43 days, available data suggested there has been a moderate expansion of economic activity.
He noted that the shutdown likely weighed on activity this quarter, though that will be offset by next quarter…
“The Fed funds rate is now within a broad range of estimates of its neutral value, and we are well-positioned to wait to see how the economy evolves,” Powell said…
“Risks to inflation are tilted to the upside and risks to employment to the downside – a challenging situation. There is no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Powell said. He added that the Fed’s framework requires a balanced approach to both goals, which led to the decision to cut for the third straight meeting.

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MacDailyNews Take: “Too Late” Powell is concerned about inflation which he thought was “transitory” four and a half years ago. Inflation has dropped from a crippling 9.1% in June 2021 to 3.0% today, 6.1 percentage points, a roughly 67% decline. Powell is nearing the end of term with just three meetings left before he’s blessedly gone for good.

On interest rates, Powell was way late to hike, then didn’t go nearly high enough, and then started cutting too early. Three strikes and you ought to be out. – MacDailyNews, November 15, 2024

Now Powell is too late to cut. Four strikes and counting.

Receipts:

In July 2023, the Fed stopped raising rates too soon. – MacDailyNews, July 2, 2024

A premature rate cut by the Fed is of higher probability in an election year. – MacDailyNews, April 2, 2024

As we wrote in February 2023, “When certain quarters, including the Fed, delude themselves and others that ‘inflation is transitory’ and waste at least a year before doing a mere portion of what is necessary* (interest rate hikes), the price will be paid for being delusional and late.”

‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021

Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022

For new generations, sometimes tough lessons have to be retaught and learned the hard way. As we go through this, remember: It’s always darkest before the dawn. – MacDailyNews, July 14, 2022

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