U.S. Federal Reserve cuts interest rates again

The U.S. Federal Reserve lowered interest rates by a quarter percentage point on Thursday, acknowledging a job market that has “generally eased” and inflation that continues moving closer to the central bank’s 2% target.

The Fed's Federal Open Market Committee, following a two-day meeting, reduced the benchmark overnight interest rate to a range of 4.50% to 4.75%, meeting widespread expectations. The decision was unanimous, with the committee noting that “economic activity has continued to expand at a solid pace.”

While a previous policy statement had specifically pointed to slowing monthly job gains, this new statement took a broader view, stating that “labor market conditions have generally eased” even as the unemployment rate remains low.

The Fed reiterated that risks to both the job market and inflation are “roughly in balance,” as it had stated in September. However, the language around inflation shifted slightly, saying price pressures had “made progress” towards the Fed’s target, rather than the earlier phrase of “made further progress.”

The personal consumption expenditures price index, excluding food and energy, a key measure of inflation, has stabilized around a 2.6% annual rate over the past three months as of September.

Trump’s Return May Influence Economic Policy

The Fed’s latest statement comes as Republican President-elect Donald Trump is set to take office in January, after defeating Vice-President Kamala Harris in Tuesday’s election. Trump’s campaign included proposals such as high tariffs on imports and strict immigration measures, policies that could reshape the economic environment the Fed will need to navigate to manage inflation and employment targets.

Following Trump’s win, investors have begun to scale back their expectations for significant interest rate cuts by the Fed.

Fed Chair Jerome Powell, originally appointed by Trump in his first term and known for past clashes over rate policy, held a news conference at 2:30 p.m. ET to discuss the new statement and the economic outlook.

When asked, Powell said the election result wouldn’t affect U.S. monetary policy in the “near term.”

Powell Intends to Remain as Fed Chair

Powell emphasized that the Fed would continue adjusting rates based on economic data to manage inflation, which has eased over the past year. He added that as new policies under the incoming administration become clear, the Fed would evaluate their impact on inflation and employment.

“It’s a process that takes some time,” Powell explained, adding, “It’s all of the policy changes that are happening. What’s the net effect? The overall effect on the economy at a given time? That’s a process…we go through all the time with every administration.”

Trump has indicated he would let Powell serve out his current term, ending in May 2026, and Powell stated on Thursday that he has no plans to step down if requested, noting that the president lacks legal authority to dismiss the Fed chair over policy disagreements.

“Not permitted under the law,” Powell stated plainly.