The Federal Reserve cut interest rates by 0.25% on Thursday, the second straight cut after two years of rate hikes aimed at curbing post-pandemic inflation.
The Federal Open Market Committee (FOMC), the committee of Fed officials responsible for setting interest rates, lowered its benchmark borrowing cost range to a range of 4.5% to 4.75%.
The rate cut, widely anticipated by economists and Fed watchers, will be the Fed's second this year. After raising interest rates rapidly in the face of high inflation, the Federal Reserve kept them at high levels to curb rapid price increases.
Inflation has fallen dramatically, but the sticker shock from higher prices was ultimately too much for Americans who two days earlier had elected President-elect Trump to a second term, threatening to shake up an economy that was only recently getting back on its feet. .
President Trump has promised to introduce massive tariffs on imports into the United States, further reduce corporate tax rates and extend the 2017 tax cuts if Republicans control the House of Representatives as well as the Senate and White House. .
A Wall Street Journal poll of economists last month predicted that inflation, budget deficits and interest rates would rise under President Trump's proposed policies. President Trump has criticized these critics, saying the experts are wrong and that he has consistently misjudged his economic policy.
The White House has no control over interest rates, despite President Trump's statement in August that he “has made a lot of money” and should “at least have a say,” but if inflation starts to rise again. , the Fed is expected to control interest rates. Raise interest rates again to bring down prices.
Although the economy and labor market have remained surprisingly resilient through the Fed's interest rate hikes, last Friday's jobs report showed that jobs grew by just 12,000 jobs in October.
This is the lowest report in nearly four years and a potential red flag as the Fed monitors a slowdown in the labor market, but also a major hurricane in the South and a strike by Boeing's machinists. The latest report has been significantly downgraded.
Federal Reserve Chairman Jerome Powell has reiterated the agency's commitment to political independence, but Trump's return threatens to undermine the rest of his term, which ends in 2026.
President Trump appointed Powell as chairman in 2017, but relations quickly deteriorated after former President Powell publicly criticized him for raising interest rates during his tenure.
President Trump this summer defended his right to comment on monetary policy, including interest rates, telling Bloomberg: That doesn't mean they need to be heard. ”
The Fed is expected to consider another rate cut in December, the last before Trump takes office in January.
