The Federal Reserve on Wednesday announced its third consecutive interest rate cut of 2024, reducing its benchmark rate by 0.25 percentage points amid cooling inflation. The central bank has now trimmed rates by 1 percentage point since September, offering relief to Americans carrying credit card balances and other debt.

The Fed lowered the federal funds rate — the interest rate banks charge each other for short-term loans — to a range of 4.25% to 4.5%, down from its previous target range of 4.5% to 4.75%. The decision comes after policymakers slashed rates by 0.5 percentage points in September, followed by a 0.25 percentage point drop in November. 

Wednesday’s move marks the Fed’s final interest rate decision prior to President-elect Donald Trump’s Jan. 20 inauguration. While price increases have cooled from their June 2022 peak, opening the door to Fed rate cuts this year, inflation has remained sticky and well above the Fed’s 2% annual target. 

Consumer prices in November rose 2.7% on a yearly basis, fueled by elevated housing and food costs. Given that stubborn inflation, many analysts think the Fed is likely to make fewer rate cuts in 2025 amid concerns that could cause the economy to overheat. 

At the same time, the Fed has so far defied forecasters’ warnings that its rate hikes could trigger a recession.

“While the Fed’s 2% inflation target has proven elusive so far, it has been successful in bringing inflation down from its highs without derailing an economy that continues to hum along,” noted Joe Gaffoglio, CEO of Mutual of America Capital Management, in an email before the Fed announcement. “However, if inflation continues to stay above target in the new year, the markets may be too optimistic on how many cuts the Fed may deliver.”

The Fed’s first rate meeting of 2025 is scheduled for Jan. 28-29, or after Trump’s inauguration. About eight in 10 economists expect the Fed to hold rates steady at that meeting, according to financial data firm FactSet.

—This is a developing story and will be updated.