As expected, the US Federal Reserve reduced on Wednesday  the benchmark policy rate by 25 basis points (bps), resulting in the key interest rate in the world's largest economy settling between  4.25 to 4.50 percent.

Eleven 11 members of the Federal Open Market Committee (FOMC) voted to reduce the key interest rate with one member, Beth M. Hammack, dissenting, favoring a pause.

US Fed Chairman Jerome Powell said the 25 bps rate reduction was based  on the  high inflation figures this year, and the possibility that next year will see higher inflation rates.

“I think that a slower pace of (rate) cuts really reflects both the higher inflation readings we’ve had this year and the expectations that inflation will be higher” in 2025, Powell said. “We’re closer to the neutral rate, which is another reason to be cautious about further moves.”

US headline inflation went up for a second consecutive month to 2.7 percent in November.

For his part, Blerina Uruci, chief economist at T. Rowe Price, said the tone of Powell’s news conference was surprisingly “hawkish,” or the US Fed is favoing relatively high interest rates.

However, the Fed emphasized its commitment to balancing risks and achieving its dual goals of maximum employment and stable inflation.

Also, US inflation has inched closer to the Fed's 2-percent target. Hence, future rate adjustments will depend on incoming data and evolving economic conditions.
 

YONHAP PHOTO