The US Federal Reserve cut interest rates by a quarter point, but also signaled a slow pace of further cuts.
Policymakers voted 11 to 1 to cut the U.S. central bank’s key lending rate to between 4.25 and 4.5%, according to a statement from the Fed.
Economic activity continues to expand at a solid pace, with the unemployment rate “remaining low” and inflation “remaining somewhat elevated,” the central bank’s rate-setting Federal Open Market Committee said in its latest policy.
statement.
The only stumbling block was Cleveland Fed President Beth Hammack, who supported keeping rates where they were.
Federal Reserve Chairman Jerome Powell said the move reflected positive overall economic conditions.
“I feel pretty good about where the economy is,” Powell said at a news conference after the central bank lowered interest rates. “To be honest, I’m very optimistic about the economy and we’re in a really good place.”
The pace of reduction is likely to slow in 2025
Members of the Fed’s rate-setting committee plan only two quarter-point rate cuts in 2025, down from four previously predicted, and raised their inflation outlook for next year to 2.5% from 2.1%. Has given.
This may also be partly related to uncertainty about possible policy changes once Donald Trump begins his second term.
Wednesday’s rate decision was the last planned decision under Joe Biden before Trump’s inauguration next month.
Some of Trump’s policy proposals, not least his call for tariffs in global trade, may prove inflationary.
Fed officials have said that at present, it is difficult to predict the impact of Trump’s return to the White House, as it is not yet possible to know exactly what plans he intends to pursue, or in what precise manner. From.
The dollar rose against many other currencies but stock markets fell after Wednesday’s news, which showed investors disappointed by a more cautiously anticipated action plan for 2025.
As of 3:30 p.m. on Wall Street, the three main US indexes were down 1.38% or more in the case of the Dow Jones.
ft/msh (AFP, AP, Reuters)
