Jerome Powell comments on policy outlook after lowering interest rate by 25 bps

Federal Reserve Chairman Jerome Powell explains the decision to cut the policy rate, federal funds rate, by 25 basis points to the range of 4.25%-4.5% after the December meeting and responds to questions in the post-meeting press conference.

Follow our live coverage of the Fed policy announcements and the market reaction.

Fed meeting press conference key quotes

"Inflation expectations remain well-anchored."

"Risks to achieving goals roughly in balance."

"Attentive to risks on both sides."

"We can be more cautious going forward, can be more cautious in reducing rates."

"Reducing policy restraint too slowly could unduly weaken economy, employment."

"Policymaker projections for policy rate are higher for next year, consistent with higher inflation."

"Job creation is below the level that would hold jobless rate constant."

"Inflation story broadly on track, housing services steadily coming down."

"Extent and timing language shows we are at or near point of slowing rate cuts."

"Slower pace of rate cuts reflects expectation of higher inflation."

"Risks and uncertainty around inflation we see as higher."

"Cuts we make next year will react to data."

"We are significantly closer to neutral, still restrictive."

"As long as the labor market, economy is solid, can be cautious as we consider further cuts."

"We think the economy in a real good place and policy too."

"What's driving the slower rate-cut path is stronger economic growth and lower unemployment."

"Also driving the slower rate-cutting path is higher inflation this year and next year."

"Also closer to neutral rate, another reason to be cautious."

"Committee is discussing ways in which tariffs can drive inflation, we've done a good bit of work on that."

"Premature to make any conclusion on impact of tariffs, don't know what countries, what size, how long."

"Core inflation coming down to 2.5% next year, as in projections, would be significant progress."

"We also have to think about the labor market, mindful it is gradually cooling."

"We expect significant policy changes, we need to see what they are and the effects to get a clearer picture."

"We will be looking for further progress on inflation to make those cuts."

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This section below was published at 19:00 GMT to cover the Federal Reserve's policy decisions and the immediate market reaction.

The US Federal Reserve (Fed) announced on Wednesday that it lowered the policy rate, federal funds rate, by 25 basis points to the range of 4.25%-4.5% following the December meeting.

The Fed made small changes to its policy statement from the November meeting, reiterating that they will assess incoming data, evolving outlook and balance of risks when considering the extent and timing of additional rate adjustments.

Key takeaways from Fed policy statement

"Risks to inflation and employment goals roughly in balance."

"Fed lowers reverse repo rate by 30 basis points to 4.25% versus 25 bps cut to fed funds rate."

"Fed vote in favor of rate cut was 11-1; Cleveland Fed President Hammack dissented, preferring to leave policy rate unchanged."

Alongside the policy statement, the Fed also published the revised Summary of Economic Projections, with key highlights listed below.

"Fed officials' median view of fed funds rate at end-2024 4.4% (prev 4.4%)."

"Fed officials' median view of fed funds rate at end-2025 3.9% (prev 3.4%)."

"Fed officials' median view of fed funds rate at end-2026 3.4% (prev +2.9%)."

Fed officials' median view of fed funds rate at end-2027 3.1% (prev +2.9%)."

"Fed officials' median view of fed funds rate in longer run 3.0% (prev 2.9%)."

"Fed projections imply 50 basis points of rate cuts in 2025, another 50 bps in 2026."

"Fed projections show longer-run policy rate at 3.0% vs 2.9% in September projections."

"Fed projections show one of 19 officials see no cuts in 2025, 3 see one cut, 10 see 2 cuts, 3 see 3 cuts, one sees 4 cuts, one sees 5 cuts."

"Fed projections show stronger growth and stronger inflation in 2025."

"Fed policymakers see 4.3% unemployment rate at end of 2025 versus 4.4% in September projections."

"Fed policymakers see end-2025 PCE inflation at 2.5% versus 2.1% in September; core seen at 2.5% versus 2.2%."

"Fed policymakers see 2.1% GDP growth in 2025 versus 2.0% in September, see longer-run growth at 1.8%, unchanged from September."

Market reaction to Fed policy announcements

The US Dollar gathers strength against its rivals following the Fed policy announcements. At the time of press, the USD Index was up 0.6% on the day at 107.58.

 

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This section below was published as a preview of the Federal Reserve's policy decisions at 11:00 GMT.

• The Federal Reserve is widely expected to lower the policy rate by 25 bps at the last meeting of 2024.
• Fed Chairman Powell’s remarks and the revised dot plot could provide important clues about the interest-rate outlook.
• The US Dollar’s valuation could be impacted significantly heading into the Christmas holiday.  

The US Federal Reserve (Fed) will announce monetary policy decisions following the December policy meeting on Wednesday. Alongside the policy statement, the US central bank will publish the revised Summary of Economic Projections (SEP), also known as the dot plot. 

The CME FedWatch Tool shows that investors are fully pricing in a 25 bps Fed cut, which would bring the policy rate down to the range of 4.25%-4.5%. The market positioning suggests that the US Dollar’s (USD) reaction to the interest-rate decision alone could remain short-lived. Instead, investors will assess the details of the dot plot and scrutinize comments from Fed Chairman Jerome Powell in the post-meeting press conference.

The SEP in September showed that Fed officials' median view of the fed funds rate at the end of 2025 stood at 3.4%. Revisions to interest rate expectations, inflation and growth projections for next year could provide important clues about the policy outlook and influence the USD’s valuation.

Previewing the Fed’s last policy meeting of the year, “the FOMC is expected to announce an additional rate cut, with the Committee easing rates by 25bp to 4.25%-4.50%,” said TD Securities analysts in a recently published report and added: 

“While we think the Fed will remain keen on projecting additional policy easing for 2025, our view is that guidance regarding the pace of rate cuts will be more cautious going forward. This might be interpreted as a hawkish rate cut by market participants.”

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The US Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy with the revised dot plot on Wednesday at 19:00 GMT. This will be followed by Fed Chairman Jerome Powell's press conference starting at 19:30 GMT. 

An upward revision to the end-2025 interest-rate projection could be assessed as a hawkish tilt in the policy outlook and trigger a USD rally with the immediate reaction, causing EUR/USD to push lower. On the other hand, a downward revision could have the opposite effect on the pair’s action.

Powell is likely to be asked whether policymakers took US President-elect Donald Trump’s proposed policies, especially regarding tariffs, into account when penciling down their projections for next year.

In case Powell notes that they will take a gradual approach to further policy easing because of the uncertainty created by the potential tariffs on the inflation outlook, the USD could preserve its strength. On the other hand, if Powell downplays inflation jitters and reemphasizes their willingness to keep the labor market strong next year, this could be seen as a dovish tone and make it difficult for the USD to stay resilient against its rivals. In this scenario, EUR/USD could stage a rebound in the near term.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“EUR/USD remains technically bearish in the near term as it remains within the descending regression channel coming from late September. Additionally, the Relative Strength Index Indicator (RSI) on the daily chart stays near 40, highlighting the lack of buyer interest.”

“On the downside, 1.0400 (static level) aligns as immediate support before 1.0260 (lower limit of the descending channel) and 1.0200 (static level, round level). In case EUR/USD rises above 1.0600, where the Fibonacci 23.6% retracement level of the October-December downtrend is located, and starts using this level as support, sellers could be discouraged. In this scenario, 1.0690-1.0700 (50-day Simple Moving Average, Fibonacci 38.2% retracement) and 1.0800 (Fibonacci 50% retracement) could be seen as next resistance levels.”