US central bankers have cut the country's key interest rate by a quarter of a percentage point in a bid to keep the US economy on solid footing following Donald Trump's presidential election victory.
In announcing the widely expected interest rate cut – the Federal Reserve's latest attempt to balance the risks of inflation with the risks in the US job market – the central bank said it had not seen any increase in inflation since its previous statement. The sentence that said “I have greater confidence'' in the progress being made was deleted. Toward the long-term goal of 2%.
At the same time, the Federal Open Market Committee said inflation was “on track” toward its goal.
“The Committee determines that the risks to achieving employment and inflation goals are approximately balanced,” the Federal Open Market Committee said in a statement. “The economic outlook is uncertain and the committee is mindful of the risks on both sides of its dual mandate.”
The Fed announced its second straight interest rate cut to a range of 4.50% to 4.75% early Thursday, amid growing uncertainty over President Trump's plans to impose tariffs on cheap imports and crack down on immigration.
Jackson Hole University officials lowered the benchmark rate by half a percentage point in September to shift focus to the U.S. job market.
Republicans are expected to control both chambers of Congress starting in January, giving the New York real estate mogul seemingly free rein to carry out his campaign promises.
Once Trump takes office in January, it will be even more likely that he will fire Fed Chairman Jerome Powell. The two sides clashed during his 2017-2021 term when the former president called for lower interest rates and called his appointees “enemies.”
Federal Reserve officials appeared encouraged by new data showing worker productivity rose 2.2% in the third quarter of this year, while jobless claims remained sluggish.
“This is the kind of outcome the Fed is hoping to see as it considers rate cuts,” said Carl Weinberg, chief economist at High Frequency Economics.
But if President Trump's economic policies end up stimulating inflation, the Fed may need to reconsider plans to cut rates further.
“Over time, we'll see where the deficit goes and the tariffs could become an issue,” said Stephen Blitz, chief U.S. economist at TS Lombard.
Macquarie economists David Doyle and Chinara Azizova said on Wednesday: “The outlook becomes more uncertain as future data and President Trump's policy approach in 2025 will determine the extent and timing of further rate cuts.” said.
