Fed cuts interest rates, delivering relief for borrowers at last meeting before Trump takes office

The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday, delivering relief for borrowers at the central bank's last meeting before President-elect Donald Trump takes office next month.

The central bank predicted fewer rate cuts next year than it had previously indicated, however, suggesting concern that inflation may prove more difficult to bring under control than policymakers thought just a few months ago.

The major stock indexes inched downward in trading after the announcement in response to the forecast of fewer rate cuts.

Speaking at a press conference in Washington D.C. on Wednesday, Fed Chair Jerome Powell said the central bank may proceed at a slower pace with future rate cuts, in part because it has now lowered interest rates a substantial amount.

Powell also said a recent resurgence of inflation influenced the Fed's expectations, noting that some policymakers considered uncertainty tied to potential policy changes under Trump.

"It's common-sense thinking that when the path is uncertain, you get a little slower," Powell said. "It's not unlike driving on a foggy night or walking around in a dark room full of furniture."

The move marked the third consecutive interest rate cut since the Fed opted to start dialing back its fight against inflation in the fall. The Fed has lowered interest rates by a percentage point in recent months.

However, the Fed's forecast on Wednesday said it anticipates only a half a percentage point of rate cuts next year and another half-percent cut in 2026.

The benchmark interest rate helps determine loan payments for everything from credit cards to mortgages. Even after recent cuts, the Fed's interest rate remains at a historically high level of between 4.25% and 4.5%.

The size of the interest rate cut on Wednesday matched investors' expectations.

The latest rate cut may prove the Fed's last for many months, experts previously told ABC News.

A recent bout of stubborn inflation could prompt central bankers to freeze interest rates in place as they bring price increases under control. A humming economy, meanwhile, shows little need for the jolt of activity that lower borrowing costs may provide, the experts said.

Consumer prices climbed 2.7% in November compared to a year ago, marking two consecutive months of accelerating inflation, government data last week showed.

Inflation has slowed dramatically from a peak of more than 9% in June 2022. But the recent uptick has reversed some progress made at the start of this year that had landed price increases right near the Fed's target of 2%.

In August, Trump said the president should have a role in setting interest rates. The proposal would mark a major shift from the longstanding norm of political independence at the Fed.

Powell struck a defiant tone last month when posed with the question of whether he would resign from his position if asked by Trump.

"No," Powell told reporters assembled at a press conference in Washington, D.C., blocks away from the White House.

When asked whether Trump could fire or demote him, Powell retorted: "Not permitted under the law."

ABC News' Elizabeth Schulze and Cheyenne Haslett contributed to this report.