The new interest rate is now in the range of 4.25-4.50 percent.
Wednesday's decision to lower the interest rate was not unanimous. One member voted for it to remain unchanged.
With today's action, we have lowered our policy rate by a full percentage point from the peak and our policy is now significantly less restrictive. We can therefore be more cautious when considering further adjustments to the policy rate, said Fed chief Jerome Powell at a press conference.
The goal is approaching
Inflation is approaching the target of 2 percent, but according to the Fed, it is still "somewhat elevated".
The interest rate cut was expected. What may surprise is the adjustment of the forecast, that they take a step back, says SEB's US economist Elisabet Kopelman.
In its forecast, the central bank estimates that there will only be two interest rate cuts of 0.25 percentage points each in 2025. In September, it was estimated that there could be four interest rate cuts next year.
A question that arises when looking at these changed inflation prospects is whether Fed members start thinking about the effects of Trump's policy. It could be that they want to slow down the pace considering the great uncertainty surrounding the policy, says Elisabet Kopelman.
The stock market took a hit
During 2026, it is estimated that there will be two interest rate cuts of 0.25 percentage points each, and another one in 2027, reports CNBC.
The Fed members' forecasts for what the policy rate will be at the end of 2025 and 2026 have been raised to 3.9 and 3.4 percent, respectively.
The leading indexes on the New York stock exchange were on the plus side before the news from the Fed, but they all turned down.
During 2022-2023, the Fed raised the interest rate rapidly to curb the effects of the inflation shock. Earlier this year, the Fed began to lower the interest rate. In September, it was lowered by 0.50 percentage points and in November by 0.25 percentage points.
