Politics
NEW: US Economy Set To Explode After Fed Chair Folds To Trump
The federal reserve cut its benchmark interest rate a quarter of a percentage point on Wednesday, opting for its second interest rate cut this year.
The widely expected move comes after President Donald Trump had for weeks called on Federal Reserve Chairman Jerome Powell to lower interest rates, though Wednesday’s lowering falls short of the benchmark Trump had been calling for.
The fed had previously projected an additional quarter-point cut at its next meeting in December, but Fed Chair Jerome Powell on Wednesday voiced uncertainty about the possibility of another reduction. “A further reduction of the policy rate in December is not a foregone conclusion — in fact, far from it,” Powell said while speaking at a press conference in Washington D.C.
Wednesday’s decision marked the first interest rate adjustment since the ongoing government shutdown began earlier this month. During Wednesday’s press conference, Powell acknowledged potential for economic uncertainty due to the Democrat-led shutdown but ultimately rejected the notion that it will have any lasting impact.
“The shutdown of the federal government will weigh on economic activity while it persists, but these effects should reverse when the shutdown ends,” Powell said.
Fed policymakers on Wednesday voted to lower the benchmark federal funds rate by 25 basis points to a new range of 3.75 percent to 4 percent. The decision comes of the heels of a an identical rate cut in September, which was the first reduction this year.
Policymakers have been attempting to grapple with economic data showing a slowdown in the labor market in recent months as businesses adapt to the Trump Administration’s policies on tariffs and immigration. The Federal Open Market Committee (FOMC), which guides the central bank’s monetary policy moves, noted that there are risks on both sides of its dual mandate goals of stable prices in line with the 2% long-run target for inflation, as well as promoting maximum employment, Fox Business reported.
The FOMC’s vote in favor of the rate cut was 10-2. Fed Governor Stephen Miran dissented in favor of a larger 50 basis point cut, while Kansas City Fed President Jeffrey Schmid was opposed to cutting rates at this meeting.
“Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households’ perceptions of job availability and firms’ perceptions of hiring difficulty continue to decline,” Powell said.
“Inflation for goods has picked up. In contrast, disinflation appears to be continuing for services. Near-term measures of inflation expectations have moved up on balance over the course of this year on news about tariffs, as reflected in both market and survey-based measures,” he added, noting that longer-term expectations remain consistent with the 2 percent inflation goal.
“We remain committed to supporting maximum employment, bringing our inflation sustainably to our 2% goal and keeping longer-term expectations well-anchored,” Powell explained. “Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families and businesses across the country. Everything we do is in service to our public mission.”
