US Fed cuts rate by quarter-point amid economic uncertainty
U.S. Fed cuts benchmark policy rate by 25 basis points to range between 4.25% - 4.50%, matching estimates. (AA Photo)
The U.S. Federal Reserve lowered interest rates by a quarter point on Wednesday, bringing the key lending rate to between 4.25% and 4.50%. The decision came as the central bank faces ongoing uncertainty about inflation and the economic policies of U.S. President-elect Donald Trump.
Policymakers voted 11-to-1 to lower the key lending rate to a range between 4.25% and 4.50%, as stated in the Fed’s official announcement.
In updated economic forecasts, members of the Fed’s rate-setting committee revised their projections, now expecting just two quarter-point rate cuts in 2025, down from the earlier prediction of four. They also raised their inflation outlook for the coming year, adjusting it from 2.1% to 2.5%.
Inflation remains remains ‘somewhat elevated’: US Fed chair
While inflation has “eased significantly,” the level remains “somewhat elevated” compared to the targeted two percent, U.S. Federal Reserve Chair Jerome Powell said Wednesday.
Powell’s comments comes at the start of a news conference after the central bank announced it cut interest rates by a quarter point while signaling a slower pace of cuts ahead in the face of lingering concerns about consumer price pressures.
While the Fed has made significant progress in addressing inflation through interest rate hikes over the past two years, it has more recently begun to pare back rates in an effort to stimulate demand in the economy and support the labor market.
However, inflation has been edging upward over the past couple of months, moving further from the Fed’s long-term target of 2%, raising concerns that the battle against inflation is far from over.
This decision marks the final planned interest rate move before the transition from Democratic President Joe Biden to Republican President-elect Donald Trump.
Trump’s economic proposals, including tariff hikes and the mass deportation of undocumented workers, have added to the uncertainty. Combined with the recent increase in inflation data, these factors led some analysts to revise expectations for the number of rate cuts in 2025. As a result, many now predict that interest rates will need to remain higher for a longer period.
