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The Fed cuts interest rates days after the election
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The Fed cuts interest rates days after the election

The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, setting the latest path for borrowing costs just two days after President-elect Donald Trump’s victory.

The move comes two months after the Fed cut its benchmark interest rate by half a percentage point, ending a years-long fight against inflation and providing relief for high-cost borrowers.

Speaking at a press conference in Washington, DC on Thursday, Fed Chairman Jerome Powell expressed optimism about the prospects for a “soft landing”, where the US avoids a recession while inflation returns to normal .

“We remain confident that with an appropriate recalibration of our policy stance, the strength of the economy and labor market can be maintained, with inflation coming down sustainably to 2 percent,” Powell said.

The trajectory of inflation could change in the coming months. Trump’s proposed tariff hikes and mass deportation of undocumented immigrants are expected to raise consumer prices, experts say. said before ABC News.

Asked about the Fed’s potential response to Trump’s policies, Powell said the central bank will ultimately make its decisions based on how any policy changes could impact the economy.

“In the short term, the election will have no effect on our policy decisions,” Powell said Thursday. “We don’t know what the timing and substance of any policy changes will be. Therefore, we do not know what the effects on the economy will be.”

“We don’t guess, we don’t speculate and we don’t assume,” Powell added.

The Federal Open Market Committee (FOMC), a policy-making body within the Fed, has forecast further interest rate cuts.

By the end of 2024, interest rates will fall another quarter of a percentage point from their current level, between 4.5% and 4.75%, according to the FOMC’s forecast. Interest rates will fall another percentage point during 2025, the projections also indicated.

In recent months, the US has come closer to a “soft landing”, in which inflation returns to normal and the economy avoids a recession.

Government data released last week looked solid economic growth in a recent three-month period, alongside an ongoing one cooling of inflation.

US employment slowed down in October, but the aftermath of hurricanes and labor strikes likely caused an undercount of the nation’s workers, data from the U.S. Bureau of Labor Statistics showed on Friday.

Since 2021, the Fed has tried to control inflation with high interest rates. Even after the Federal Reserve cut its benchmark interest rate in September, it remains at a historically high level.

Inflation has cooled dramatically from a peak of around 9% in 2022, just short of the Federal Reserve’s target rate of 2%.

Asked earlier about the 2024 election at a news conference in Washington, DC in December, Powell said: “We’re not thinking about politics.”

Trump’s election seems to have produced a PULSE for the scholarship. U.S. stock markets rose at the open on Wednesday, just hours after Trump declared victory.

The Dow Jones Industrial Average rose more than 1,300 points, representing a nearly 3% increase in the index. SThe tech-heavy &P 500 and Nasdaq each rose more than 2 percent.

Shares of Tesla, the electric vehicle company run by Trump ally Elon Musk, rose about 14.5 percent in early trading on Wednesday.

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