The Federal Reserve cut interest rates by 25 basis points on Wednesday, but reined in the number of rate cuts ahead on concerns about sticker inflation amid a brighter economic outlook.

The Federal Open Market Committee, the FOMC, cut its benchmark rate by 25 bps to a range of 4.25% to 4.5%.

In what was the third rate cut of the year since the first cut in September, Fed members now appear to be easing away from a deep rate cut cycle, betting on fewer rate cuts ahead.

Fed members now see the benchmark rate falling to 3.9% for next year, suggesting just two rate cuts, compared with a prior forecast in September for four cuts. Rates are seen falling to 3.4% in 2026, up from a prior forecast of 2.9%.

In the run up to the Fed meeting, Fed members have expressed concerns that inflation could be stalling above the 2% target and called for a more cautious approach to rate cuts.

Earlier this month, Fed chairman Jerome Powell conceded that the economy had been stronger and inflation a little higher than expected in September.

The incoming Donald Trump administration has also muddied investor expectations on the rate cut outlook. Trump's policies including tariffs are expected to be inflationary and pro-growth, stymying the Fed's battle against inflation.

Powell's press conference at 2:30 p.m. ET (19:30 GMT) will be closely watched for further into insight into the Fed's latest economic forecast including the interest-rate path.(Cay) Newsmaker23

Source: Investing.com