T
he Federal Reserve has reduced its forecast for interest rate cuts next year, citing concerns about inflation. Key points include:
* The Fed cut interest rates by a quarter percentage point in December, as expected, but noted it was a "closer call" due to inflation worries.
* Despite the cut, mortgage rates are expected to remain elevated and stay in the 6% range in 2025.
* The Fed's target interest rate is now at 4.25%-4.5%, with three straight cuts lowering the total by 100 basis points since September.
* Inflation remains a concern, but the labor market continues to cool, which influenced the decision to make rates slightly less restrictive.
* Fewer cuts are expected next year, with just 50 basis points forecasted, suggesting two quarter-point cuts for the year.
* The Fed's Chair Jerome Powell said they're in a "really good starting place" and have room to maneuver depending on future policies.
Mortgage rates may increase slightly this week despite the rate cut announcement. Consumers are adjusting to the new normal of elevated mortgage rates, with experts believing other factors like jobs and inventory will drive home sales back on track.
