03:11 PM EST, 12/18/2024 (MT Newswires) -- With the risks to the Federal Reserve's inflation and employment mandates, the Federal Open Market Committee will continue to act cautiously, but it remains on track to lower rates further, Fed Chairman Jerome Powell said Wednesday at a press conference after the FOMC lowered its target range for the federal funds rate to 4.25% to 4.50%, as expected.

"Downside risks appear to have diminished, but the labor market is looser than pre-pandemic and it's clearly still cooling further," Powell said. "So far in a gradual and orderly way. We don't think we need further cooling to get inflation down to 2%."

Powell said that it was a "closer call" to move forward with the rate cut at Wednesday's meeting, with some more cautious due to the uncertainty related to inflation with the incoming administration.

"Some people did take a very preliminary step and start to incorporate, you know, highly-conditional estimates of economic effects of policies into and said so in the meeting," Powell said. "Some people said they didn't do so. And some people didn't say whether they did or not. So, we have people making a bunch of different approaches to that."

The FOMC's statement was little changed, but the Summary of Economic Projections showed a median estimate of only two rate cuts in 2025, compared with the four cuts estimated as recently as three months ago, with upward adjustments to inflation and growth estimates and a downward adjustment to the unemployment rate.

There were matching upward adjustment to the year-end federal funds rate estimates for 2026, 2027 and the longer-run rate.

In addition, one Fed official, Cleveland Fed President Beth Hammack, dissented from the decision for a rate cut, preferring no change in rates.

Powell said that the current level of the federal funds rate is "now significantly less restrictive and gives the FOMC room to be more cautious when considering further rate reductions. Still, policy is restrictive compared with the assumed long-term rate and will necessitate more rate reductions.

"We know that reducing policy restraint too fast or too much could hinder progress on inflation," Powell said. "At the same time, reducing policy restraint too slowly better too little could unduly weaken economic activity and employment."