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Updated at 2:43 PM EST
The Federal Reserve lowered its benchmark lending rate for the third meeting in a row Wednesday, but trimmed its forecast for further reductions into 2025 amid what it called "elevated" inflation risks in the firmly resilient economy.
The Federal Open Market Committee, which sets monetary policy for the central bank, lowered its key lending rate by 25 basis points, or 0.25 percentage point, to between 4.25% and 4.5%.
The move, the third rate cut in succession, followed the central bank's two-day policy meeting in Washington and marks a full percentage point reduction since the Fed began cutting in September.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the Fed said in its official statement.
"The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate."
The Fed also published its final Summary of Economic Projections report for the year, a collection of growth and inflation forecasts from officials that serves as a guide for its policy path over the next three years.
The so-called dot plots suggest two rate cuts in 2025, with an end-of-year Federal Funds Rate of 3.9%, up from its September projection of 3.4%
In fact, the Fed now sees PCE inflation, its preferred gauge, rising to 2.5% by the end of next year, well ahead of its September forecast of 2.1%.
U.S. stocks pared gains following the Fed statement, with the S&P 500 last marked 43 points, or 0.71%, lower on the session.
The tech-focused Nasdaq, meanwhile, fell 165 points, or 0.82%, while the Dow was last marked 232 points to the downside.
Benchmark 10-year Treasury note yields rose 6 basis points to 4.4354% while 2-year notes added 11 basis points to change hands at 4.318%.
The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.65% higher at 107.645.
Related: Donald Trump's plans will test Fed interest rate cut bets in 2025
The CME Group's FedWatch suggests the first rate cut of the year will likely come in May, compared to a 65% chance of a rate cut in March prior to today's Fed meeting.
"In being arguably late to cut in the first place, the Fed is also perceived to be playing a degree of catch up," said Lindsay James, investment strategist at Quilter Investors:
"However, investors had been braced for a more hawkish tone going into 2025, and that too has materialised," she added. "Potential inflationary pressures ahead including Trump’s tariffs, immigration controls and personal and corporate tax cuts are expected to see a shallower path of easing in future months."