US central bankers have cut their key lending rates by a quarter percentage point as they seek to keep the US economy on strong footing following Donald Trump’s landslide election victory.
As the Federal Reserve unveiled a widely expected rate cut — its latest effort to boost the U.S. job market while curbing inflation — the central bank said it believes “its employment and inflation The risks of achieving the goals are approximately in balance.”
However, the Fed’s Open Market Committee omitted a line from its previous statement, saying it has “greater confidence” that inflation is continuing to move toward its long-term target of 2%. The committee said it believed it had “made progress” towards its inflation target.
The Fed also adjusted its language around the job market, where recent labor strikes and hurricanes have caused data disruptions.
“Since the beginning of the year, labor market conditions have generally eased, and the unemployment rate has increased but remains low,” the Fed’s statement said.
The Federal Reserve on Thursday announced a second consecutive rate cut to 4.50%-4.75% amid uncertainty over Trump’s plans to impose tariffs on cheap imports and curb immigration.
Fed Chairman Jerome Powell said at a press conference after the Fed cut rates again that the US economy is outperforming global peers and addressing geopolitical risks, and business people are optimistic about the outlook. .
“If anything, people feel next year – I’ve heard this from a number of people – that next year could be even stronger than this year,” Powell said.
He would not say whether the next administration’s expected policy changes would change the economic outlook.
“We don’t guess, we don’t speculate, we don’t speculate” about what policies will be implemented, Powell said. “In the near term, the election will have no impact on our policy decisions.”
Officials cut the benchmark rate by half a point in September – the first cut in four years – as it turned its attention to the US job market.
Republicans look set to control both houses of Congress by January, giving the New York real estate mogul a free hand to implement his campaign promises.
Trump may also ask Powell to step down after taking office in January; The pair clashed during his 2017-2021 term when the former president demanded lower interest rates, calling his own appointee to the job an “enemy”.
Asked whether he would resign if the president-elect asked, Powell said “no” at a news conference after the Federal Reserve policy meeting.
The Fed chair said attempts to oust him before his term ends “are not permitted under the law.”
The latest cut came as Fed officials appeared encouraged by the latest data, which showed that unemployment claims remained low, while worker productivity rose 2.2% in the third quarter of this year.
“This is the kind of outcome the Fed likes to see as it considers a rate cut,” said Carl Weinberg, chief economist at High Frequency Economics.
But if Trump’s economic policies fuel inflation, the Fed may have to reconsider any plans to cut rates further.
“You can see over time, the direction of the budget deficit, that tariffs could become a problem,” said Steven Blitz, chief U.S. economist at TS Lombard.
“Furthermore, the extent and timing of further cuts remains unclear, depending on incoming data and Trump’s policy approach through 2025,” Macquarie economists David Doyle and Chinara Azizova wrote on Wednesday.
