FAQs

1. What is the current federal funds rate after the November meeting?

The current federal funds rate after the November meeting is 4.75%.

2. What factors are influencing inflation risks for 2025?

Factors such as economic growth, a tighter labor market, government deficits, and higher tariffs are influencing inflation risks for 2025.

3. What is the outlook for the terminal federal funds rate?

While a 3% terminal federal funds rate is unlikely, the NAHB’s outlook is for a terminal rate of 3.25%, perhaps 3.5%. However, this decision will depend on factors like tariff adoption.

Conclusion

The Federal Reserve’s recent rate cut and statements indicate a cautious approach to future interest rate cuts, given the evolving economic landscape post-election. Inflation risks for 2025 are being closely monitored, and factors such as government deficits and tariffs could impact the Fed’s policy decisions. The real estate and construction sectors could benefit from lower interest rates, contributing to improved housing affordability. While further rate cuts are expected in the near future, the Fed’s ultimate terminal rate will be reevaluated based on changing fiscal policies and economic conditions. Investors and market participants should stay informed and prepared for potential shifts in monetary policy.