Federal Reserve lowers benchmark interest rates by 0.25 percent points. The Fed acknowledges that the job market has “generally eased”, and continues to make progress towards its inflation target of 2%.
After a two day policy meeting, the Federal Open Market Committee decided to change the benchmark interest rate range to between 4.50% and 4.75%.
Analysts and policymakers alike anticipated the move.
While the Fed stated that economic growth continues at a steady rate, it noted a shift in language regarding employment trends.
This latest statement refers not only to monthly employment growth but also to the broader conditions of the labor market. It highlights that, while unemployment remains low, overall job market dynamics are moderated.
The Fed, in keeping with its policy statement from September, described both the inflation and employment risks as being “roughly balanced.”
The central bank has nuanced the comments it made on inflation by noting “progress” towards its target.
The previous phrase “further advancement” was used.
Reuters reports that the data from the PCE core price index, which excludes volatile energy and food prices, remained stable, with an increase of 2.6% per year as of September.
This announcement comes against the backdrop that President-elect Donald Trump is returning to office after his win over Democratic Vice President Kamala Harris.
The Fed must navigate potential economic uncertainty created by Trump’s promises. These include tariffs on imported goods and tighter immigration policy.
As officials strive to maintain stability, these policy changes could have an impact on inflation and economic growth.
At 2:30 pm EST, Fed chair Jerome Powell will provide additional details about the decision as well as future prospects during a news conference. Powell was appointed by Trump in his first term, but later clashed over rates policies.
Investors have already adjusted their expectations for rate reductions in the future, following Trump’s victory.
In the months ahead, it will be important to monitor how the Fed balances economic growth and inflation control in a new policy environment.
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