Markets are pricing in a near certainty that the Federal Reserve will cut interest rates by a quarter point on Wednesday, bringing the target range to 4.25% to 4.5%. The focal point for investors is central bank policymakers’ economic outlook and the path forward for rate policy. The Fed will issue its decision at 2 p.m. Eastern on Wednesday, followed by Chair Jerome Powell’s press conference at 2:30 p.m.

Look for Fed’s pace on rate cuts to slow in 2025, along with near-term market volatility, UBS says

The Federal Reserve is likely to trim rates by a quarter-point on Wednesday – its third cut in a row – but investors shouldn’t expect the central bank to keep the same pace next year, UBS says.

“Overall, we believe investors should anticipate a deceleration in the pace of rate cuts in 2025 and near-term volatility as markets recalibrate the Fed’s standpoint,” wrote Solita Marcelli chief investment officer Americas for UBS Global Wealth Management in a Wednesday report.

There’s a silver lining in that short-term market turbulence, as investors who are under-allocated toward stocks can snap them up, she said.

Investors should also deploy any excess cash they’re holding into high quality and diversified fixed income strategies and equity income strategies, she added.

“These can offer income generation and portfolio diversification as lower interest rates will likely erode returns on cash next year,” Marcelli said.

 —Darla Mercado

Loan interest rates remain high even as Fed has reduced rates

The Federal Reserve has dialed back interest rates by three-quarters of a point since the end of its September meeting, but borrowers aren’t seeing a whole lot of savings just yet.

The rate on a 30-year fixed mortgage is sitting at 6.95% as of the week of Dec. 13, according to MND. That’s up from 4.29% during the week of March 11, 2022 – and it’s up from 6.12% the week of Sept. 13, 2024. Mortgage rates are tied to the 10-year Treasury note yield, which has climbed this fall.

Credit card rates haven’t changed much since the Fed kicked off its rate cuts. They’re sitting at 20.35% as of last week, according to Bankrate. That’s down from 20.78% in September, but up from 16.34% in March 2022.

Yields on savings have cooled in the past three months, however. The annual percentage yield on a five-year certificate of deposit 2.86% in the week of Dec. 13, according to Haver. That’s down slightly from 2.87% in mid-September, but up sharply from 0.50% in March 2022.

 —Darla Mercado, Nick Wells

The ‘dot plot’ will be a focal point as the Fed concludes its final meeting of 2024

The Federal Reserve is widely expected to cut rates by a quarter point on Wednesday. What’s less certain is how it will proceed on rates in the new year and beyond.

While inflation has cooled since the Fed kicked off its rate-hiking campaign in March 2022, the final stretch is proving difficult. The consumer price index reading in November reflected a 12-month inflation rate of 2.7%. It’s still far off from the Fed’s 2% inflation target.

Stubborn inflation and an economy that remains resilient are leading some on Wall Street to temper their expectations for rate cuts in 2025. December’s “dot plot” will give traders a sense of where Fed policymakers see rates heading in the new year.

Read more from CNBC’s Jeff Cox on what to expect from the Fed on Wednesday.

 —Darla Mercado