Federal Reserve cuts rates

Source: Dukascopy Bank SA
The Federal Reserve has cut the interest rate paid on reserve balances to 4.4%, effective December 19, 2024, and set the federal funds target range at 4.25% to 4.5%. To support this, the Fed will carry out operations to keep short-term rates within this range, including overnight repurchase agreements at 4.5% and reverse repos at 4.25%. It will manage Treasury securities by reinvesting maturing principal above certain limits and handle agency debt and mortgage-backed securities in a similar way.



The Fed will also use transactions like dollar rolls and coupon swaps to ensure smooth settlement and maintain liquidity in short-term funding markets. These steps are designed to keep interest rates steady, support financial markets, and implement monetary policy effectively.

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