Intelligent Investment
Fed Makes Third Rate Cut This Year
December 18, 2024 2 Minute Read
Executive Summary
- The Federal Reserve lowered the federal funds rate by 25 basis points (bps) today as expected to a range of 4.25% to 4.50%. The move signals the Fed’s ongoing effort to balance the risks between economic growth and price pressures.
- The Fed increased its 2025 inflation outlook to 2.5% (personal consumption expenditures) and its GDP growth forecast to 2.1%, while also indicating it will continue to reduce the size of its balance sheet.
- CBRE believes that the Fed will reduce interest rates at a slower pace in 2025.
- We expect that the 10-year Treasury yield will remain above 4% through early 2025 due to high deficit spending and persistent inflation.
The Bottom Line
Today’s rate cut was widely expected. The Fed indicated that it will make two additional rate cuts totaling 50 bps in 2025 if inflation remains contained.
We expect that the 10-year Treasury yield will remain above 4% for some time. Markets are digesting the continued large federal budget deficit and potential for more stimulative fiscal policy. CBRE forecasts above-average economic growth accompanied by moderating inflation in 2025, allowing the nascent capital markets recovery to continue. Office leasing activity should continue to improve, while industrial leasing activity will benefit from occupiers stockpiling inventories ahead of tariffs.
