The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, setting the final course on borrowing costs two days after President-elect Donald Trump won.
The move comes two months after the Fed cut its benchmark interest rate by half a percentage point, delaying a years-long fight against inflation and providing relief to high-cost borrowers.
At a news conference in Washington DC on Thursday, Fed Chairman Jerome Powell expressed optimism about the prospects for a “soft landing” as the US avoids a recession while inflation returns to normal.
“We remain confident that by appropriately reassessing our policy stance, we can maintain the strength of the economy and the labor market by bringing inflation down to 2% in a sustainable manner,” Powell said.
The trajectory of inflation may change in the coming months. Trump’s proposals to raise tariffs and mass deportation of undocumented immigrants are expected to push up consumer prices, experts say. previously told ABC News
Asked about the Fed’s possible response to Trump’s policies, Powell said the central bank will ultimately make its decisions based on how the policy changes might affect the economy.
“In the short term, the election will not affect our policy decisions,” Powell said Thursday. “We don’t know what the timing and substance of any policy changes will be. So we don’t know what the effects on the economy will be.”
“We don’t guess, we don’t speculate and we don’t assume,” Powell added.
The Federal Open Market Committee (FOMC), the Fed’s policy-making body, has forecast further interest rate cuts.
By the end of 2024, interest rates will drop another quarter of a percentage point to between 4.5% and 4.75%, according to the FOMC’s forecast. Interest rates will drop another percentage point through 2025, projections further indicate.
In recent months, the U.S. has gradually moved closer”soft landing,” where inflation returns to normal and the economy avoids a recession.
Government data released last week was strong economic growth in the last three months, along with the continuation the cooling of inflation
US recruitment slow down in October, but hurricanes and labor strikes caused the nation’s workforce to shrink, data from the US Bureau of Labor Statistics showed on Friday.
Since 2021, the Fed has sought to contain inflation with high interest rates. Even after the Federal Reserve cut the benchmark interest rate in September, it remains at a historically high level.
In this Sept. 18, 2024, file photo, Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, DC.
Ben Curtis/AP, FILE
Inflation has cooled sharply from a peak of around 9% in 2022, hovering near the Federal Reserve’s target rate of 2%.
Asked earlier about the 2024 election at a press conference in Washington in December, Powell said: “We don’t think about politics.”
Trump’s election seems to have yielded one push for the stock market US stock markets rose at the open on Wednesday, hours after Trump claimed victory.
The Dow Jones Industrial Average rose more than 1,300 points, with the index up nearly 3%. SThe &P 500 and Nasdaq tech jumped more than 2% each.
Shares of Tesla, the electric vehicle company run by Trump ally Elon Musk, rose about 14.5% in early trading on Wednesday.
