What Do Today's Decisions and Projections Mean For Your Wallet?

The fed funds rate influences interest on all kinds of borrowing costs, including auto loans, credit card interest, and savings rates. That means Wednesday's developments could affect your budget going into the new year.

Read more about how to weather the Fed's effects on personal finances here.

Read more about how the Fed's actions today could affect savings and CD rates here.

How the Dot Plot Spooked Investors

While the Federal Reserve’s decision this week to cut its ✃key interest rate was widely expected, a series of dots the Fed released Wednesday surprised economists and investors.

The closely followed “dot plot” showed that Fed officials expected to cut their influential federal funds rate by only half a percentage point in 2025. That's half of what central bankers projected when they last released forecasts in September and a quarter-point less than what many economists and traders expected.

Markets fell significantly on the uncertainty laid out for the policy path ahea♊d, with the S&P 500 falling more than 3% into negative territory after the predicജtions were released.

Read here for a more in-depth analysis of the dot plot.

-Terry Lane

Could Tariffs Slow Rate Cuts?

President-elect Donald Trump says he loves low interest rates, but his talk of imposing tariffs is pressuring the Federal Reserve to keep rates higher for longer.

The Federal Reserve 澳洲幸运5开奖号码历史查询:cut its benchmark interest rate by a quarter-point Wednesday. However, central bankers scaled back their expectations for lowering it even further in 2025. That's part🧜ly because officials are uncertain about how the tariffs Trumpღ recently promised to impose.

Fed Chair Jerome Powell said at his press conference that some central bankers factored in the uncertainty around how tariffs will be implemented or how they'll affect inflation and the economy when making their predictions this week.

"It's kind of common sense thinking that when the path is uncertain, you go a little bit slower," Powell said. "It's not unlike driving on a foggy night or walking into a dark room full of furniture; you just slow down."

Read more about tariffs and their intersection with rate cuts here.

-Diccon Hyatt

Today's Decision Was a Close Call, Powell Said

Beth Hammack, president of the Federal Reserve Bank of Cleveland, voted against the rate cut Wednesda🌜y, instead wantin🐻g to hold rates at their current level.

It was the second dissent this year, following Fed Governor Michelle Bowman, who in September voted against cutting the rate by a steeper-than-usual 50 basis points, preferring a 25-point cut instead.

At a post-decision press c🥂onference, Federal Reserve chair Jerome Powell said the decision to cut rates today was closer than in past meetings.

"We thought it was the best decision to foster achievement of both of our goals, maximum employment and price stability," Powell said. "We see the risks as two-sided. Move too slowly and needlessly undermine economic activity in the labor market, or move too quickly and needlessly undermine our progress on inflation. So we're trying to steer between those two risks, and on balance, we decided to go ahead with a further cut."

Powell Says The Economy Is In 'A Really Good Place'

In their economic projections, committee members said they expect hig🥀her inflation and interest rates. However, the committee also expects higher Gross Domestic Product (GDP) for this year and next year and lower unemployment than they expected the last time they published their forecasts.

"We think the economy is in a really good place, and we think the policy is in a really good place," he said.

Chair Jerome Powell Says The Fed is Still Trying to Balance Unemployment and Inflation

Powell said the central🌱 bank is still working to balance its dual mandate of maximum employment and low inflation.

With employment remaining stable and inflation staying stubborn, Powell indicated that gives central bankers more runway😼 to cut less aggressively in the upcoming year.

"With today's action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive," Powell said. "We can, therefore, be more cautious as we consider further adjustments to our policy rate."

Central Bankers Scaled Back Their Projections for 2025 Cuts

Central bankers also released their Summary of Economic Projections, a snapshot of the forecasts for each individual voting member of the policyꩵ committee.

On average, central bankers scaled back their expecജtations for rate cuts in the new year. The median fed fund rate pꦇrojection for 2025 was 3.9, compared to the 3.4 expected when the last summary came out in September.

The Federal Reserve Cut Its Influential Interest Rate

The Federal Reserve cut its 澳洲幸运5开奖号码历史查询:federal funds rate by a q🍷uarter percen✅tage point to a range of 4.25% to 4.5%.

This is the third cut central bankers have made in as many meetings and bring fed funds rate range to a fuℱll percentage point lower than it was at the start of t🔥he year.

There was one dissenting vote to the policy move, cast by Cleveland Federal Reserve President Beth Hammack.ꦰ

The committee also announced it would reduce its holdings of Treasury securities and agency debt and ꦚagency mortgage‑backed securi🦩ties.

Read more about today's decision here.

The Economy Has Shifted Since the Fed Last Met

The economic landscape has changed some since the last time the committee met in November. Unemployment 澳洲幸运5开奖号码历史查询:has not risen as much as central bankers expected and inflation hasn't 澳洲幸运5开奖号码历史查询:cooled as much as the committee had hoped.

The FOMC uses interest rates as a tool to stimulate or stifle the economy. When the economy is running too hot and fueling inflation, the committee will raise ra💎tes to discourage borrowing and spending. When the economy slows, it usually brings a w🦹ave of layoffs, which the committee attempts to avoid by lowering rates and encouraging spending.

The Fed Will Make Predictions About Its Moves Next Year. Here's What to Know

Fed watchers will learn in more detail what recent economic data means🎶 for the central bank when it r🔥eleases its Summary of Economic Projections on Wednesday, in conjunction with its policy decision.

The projections are a snapshot of individual committee members' best guesses on the future of unemployment, inflation and rate cuts. Economists expect that the average prediction will be three rate cuts in 2025, fewer than were expected when they 澳洲幸运5开奖号码历史查询:last published their expectations in September.

Read more about what to know ahead of the announcement here.

What to Expect From The Federal Reserve's Interest Rate Decision

The Federal Reserve is widely expected to cut borrowing costs when it me♍ets next Wednesday, and officials could shed light on how recent economic data might affect their decisions on interest rates in the new year.

Financial markets are pricing in a 99% chance the Federal Reserve will cut the fed funds rate by a quarter percentage point to a range of 4.25% to 4.5%, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data

Read more about what to expect from the interest rate decision here.

-Diccon Hyatt