Federal Reserve's Rate Cuts in 2024 May Be Slower Due to Fiscal Policy

According to Odaily, former Cleveland Federal Reserve President Loretta Mester has indicated that the pace of interest rate cuts by the Federal Reserve next year will be influenced by fiscal policy, potentially resulting in fewer cuts than anticipated in September. Mester highlighted that the Fed's outlook will adjust in response to the fiscal plans of the incoming Republican administration, suggesting that the market may have accurately predicted fewer than the previously expected four rate cuts. Mester emphasized that fiscal policy will play a significant role in determining the speed of rate reductions in the coming year. Economists surveyed by Reuters also anticipate a 25 basis point rate cut during the December 2024 meeting. This adjustment is expected to bring the federal funds rate down to a range of 3% to 3.25% by the end of 2025, slightly below the median projection in the Fed's "dot plot" forecast.