The U.S. Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, as policymakers took note of a job market that has “generally eased,” while inflation continues to move toward┬аthe central bank’s two┬аper cent┬аtarget.
“Economic activity has continued to expand at a solid pace,” the central bank’s rate-setting Federal Open Market Committee said at the end of a two-day policy meeting in which officials lowered the benchmark overnight interest rate to the 4.50 per cent to 4.75 per cent┬аrange, as widely expected. The decision was unanimous.
But where the Fed’s previous policy statement noted slowing monthly job gains, the new one referred to the labour market more broadly.
Even while the unemployment rate remains low, “labour market conditions have generally eased,” the statement said.
Risks to the job market and inflation were “roughly in balance,” the Fed said, repeating language from the statement released after its September meeting.
The new statement also slightly altered the reference to inflation, saying that price pressures had “made progress” toward┬аthe Fed’s objective, rather than the prior language that it had “made further progress.”
The personal consumption expenditures price index excluding food and energy items, a key gauge of inflation, has changed little in the last three months, running at a roughly 2.6 per cent┬аannual rate as of September.
Trump promises could impact economic landscape
The Fed statement will be interpreted in light of Republican president-elect Donald Trump’s return to power in January.
Trump, who defeated Democratic Vice-President Kamala Harris in Tuesday’s U.S. presidential election, campaigned on promises ranging from steep tariffs on imports to a crackdown on immigration. Those proposals could have a broad and unpredictable impact on the economic landscape, which┬аthe Fed will navigate in the coming months, as officials try to keep inflation contained and close to the central bank’s target.
Fed chair Jerome Powell, who was appointed by Trump in his first term to lead the Fed and then clashed with the then-president over rate┬аpolicy in 2018 and 2019, will hold a press conference at 2:30 p.m. ET┬аto elaborate on the policy statement and economic outlook.
Following Trump’s election victory, investors have already trimmed their own bets on the central bank being able┬аto reduce interest rates as much as expected.
