Americans hoping for lower borrowing costs for homes, credit cards and cars may be disappointed after this week’s Federal Reserve meeting. The Fed’s policymakers are likely to signal fewer interest rate cuts next year than were previously expected.
The officials are set to reduce their benchmark rate, which affects many consumer and business loans, by a quarter-point to about 4.3% when their meeting ends Wednesday. At that level, the rate would be a full point below the four-decade high it reached in July 2023. The policymakers had kept their key rate at its peak for more than a year to try to quell inflation, until slashing the rate by a half-point in September and a quarter-point last month.
The problem is that while inflation has dropped far below its peak of 9.1% in mid-2022, it remains stubbornly above the Fed’s 2% target. As a result, the Fed, led by Chair Jerome Powell, is expected Wednesday to signal a shift to a more gradual approach to rate cuts in 2025. Economists say that after cutting rates for three straight meetings, the central bank will likely do so at every other gathering, or possibly even less often than that.
“We’re on the cusp of a transition to them not cutting every meeting,” said David Wilcox, a former senior Fed official who is an economist with Bloomberg Economics and the........