Authorities from the Federal Reserve (Fed), the American tax agency, cut interest rates again on Thursday (7). This is their second reduction of 2024 and the latest sign that policymakers believe inflation is finally coming under control.
The interest rates were reduced to a range of 4.5 to 4.75%.
The Fed’s move comes two days after the United States elected Donald Trump as its next president. Jerome H. Powell, the Fed chairman, stated during a press conference on Thursday afternoon that the Fed’s immediate path would not be affected by Trump’s victory.
The central bank of the United States is independent of the White House, meaning it sets interest rates without needing the approval of the president or the government. To protect this independence, Fed officials try to avoid speaking directly about politics.
However, policymakers may have to consider how a Trump presidency could change the economic outlook in the coming months and years, as this could be important for the outcome of their two official goals: to maintain slow and stable inflation, as well as a strong labor market.
The Fed has made progress towards these goals in recent months. Inflation surged sharply starting in 2021 and peaked in 2022, but has been moderating since then. In the latest report, it is almost back to normal: September’s price increases reached 2.1% overall, slightly above the Fed’s 2% target.
Recent economic data suggests that there is no need for the Fed to rush to further reduce interest rates. The unemployment rate has stabilized, and consumer spending has been surprisingly strong, so the economy does not seem to be anywhere near the brink of a painful crisis.
Source: The New York Times