Bah, humbug: After three interest rate cuts, the Fed is planning a stingier 2025

👋 Welcome to Trendlines. The secret password is "When Bernie was a bro."

I am Boston Globe financial columnist Larry Edelman, and today, I look at why the Federal Reserve is tapping the brakes on rate cuts after three months.

Plus: the best in 2024 comedy.

Trendlines is my twice-weekly newsletter for Boston Globe Media. Click the subscribe button to keep on top of business and the economy in the region and beyond.

Scrooged

The Federal Reserve on Wednesday delivered its third interest rate reduction in three months, cutting its main lending rate by a quarter-point and bringing the total decline since September to a full percentage point. But along with this gift came some not-so-glad tidings: a warning that the central bank would be stingier in the new year.

• “Today was a closer call, but we decided it was the right call,” Fed chair Jerome Powell said. “From here, it’s a new phase, and we’re going to be cautious about further cuts.”

The announcement disappointed investors and borrowers alike. We’ve barely had an opportunity to benefit from lower rates, yet the Fed is, as the old saying goes, taking away the punchbowl as inflation lingers like an unwanted party guest.

✔️ Why it matters

True, auto loans have gotten cheaper. That’s because they move in conjunction with the Fed’s short-term rates, which have declined to about 4.3 percent since September.

But the real pain point is mortgage costs, and they have climbed.

• Home loans are pegged to longer-term rates, which have risen due to stronger-than-expected economic growth, inflation concerns, and a growing federal debt.
• Meanwhile, savers have faced declining returns on CDs and money market accounts as the Fed’s benchmark rate has fallen.

Markets reacted sharply, with stocks tumbling after the Fed’s announcement and US government bonds falling as well. The S&P 500 partially rebounded Thursday morning, but the market remains uneasy.

🔮 What's next?

In its latest projections, the Fed signaled a slower path for rate cuts, reducing its 2025 outlook to two cuts instead of the four anticipated in September.

• Inflation, which has fallen to 2.8 percent this year from a peak of 5.6 percent in early 2022, has stabilized but remains above the Fed’s 2 percent target.
• Policymakers revised their 2025 inflation forecast upward to 2.5 percent.

The Fed’s caution comes amid economic uncertainty, including risks from President-elect Donald Trump’s proposed tariffs and immigration restrictions, which could push inflation higher and dampen growth. Powell likened the current situation to navigating in fog, saying, “You just slow down.”

💡 Final thought

The Fed remains focused on achieving a soft landing — bringing inflation back to 2 percent without triggering a recession — but the timeline has stretched. Core inflation isn’t expected to hit target until 2027, delaying any substantial relief for borrowers.

Feels like we got a lump of coal.

📈 Trending

Health Care: Here's why health insurance premiums in Massachusetts are among the most expensive in the country.

Politics & Policy: A bipartisan government funding plan collapsed after Trump made new demands days before a shutdown deadline.

Labor: The Teamsters said workers at seven Amazon facilities began a strike to pressure the e-commerce giant for a labor agreement.

😂 The Closer

It's been Nikki Glaser's year.

The comic killed at the Tom Brady roast, a performance that certainly got her hired to host the Golden Globe Awards in January. Her HBO special, "Someday You'll Die," is both darkly serious and hilarious. And now The New York Times has put her at the top of its Best Comedy of 2024 list.

Writes the Times's Jason Zinoman :

Wearing a glittering dress and a strategic smile, she performs showbiz cheer, but underneath that shimmering facade is not just an ace club comic, but a restless artist exploring darker terrain. Glaser gets underestimated because she’s filthy. But she can go high as well as low, cover universal subjects and meta comedy analysis, do hilarious character work (look out Instagram moms) and brainy jokes.

If you haven't seen it, check out her appearance on the Brady roast (Warning: For mature audiences only).

Glaser: "Tom also lost $30 million dollars in crypto. Tom, how did you fall for that? I mean, even Gronk was like, 'Me know that not real money.' "

Thanks for reading. Don't forget to tip your server. Trendlines will be back on Monday.