U.S. Federal Reserve officials announced their third and final interest rate cut of 2024 on Wednesday, but investors were keenly focused on something else: where they see policy heading in 2025.

The U.S. Fed cut the rate by 25 bps. — to 4.25–4.5% per annum. Jerome Powell's main theses at the concluding press conference:

Economic activity continues to grow at a steady pace. Labor market conditions have improved since the beginning of the year. Unemployment has risen but remains low. It may take another year or two to reach the 2% inflation target. “We are at or close to a slowdown in rate cuts”. “We see risks and uncertainty around inflation as higher”.

The Fed is unlikely to raise rates next year. Some economists also expected the officials to reduce the number of rate cuts they expect to make next year in light of recent sticky inflation and strong economic growth.