The Federal Reserve cut the benchmark interest rate by 0.25 percentage points on Thursday, with monetary policymakers highlighting a labor market that has generally eased, while inflation continues to approach the target of 2 % of the US central bank.
“Economic activity continued to expand at a solid pace,” the central bank’s Federal Open Market Committee said at the end of a two-day monetary policy meeting in which officials cut the benchmark overnight interest rate to the range from 4.50% to 4.75%, as widely expected. The decision was unanimous.
However, while the Fed’s previous monetary policy statement mentioned slowing monthly job gains, the new statement refers to the job market more broadly.
Even with the unemployment rate remaining low, “labor market conditions, in general, have become more flexible”, says the statement.
The risks to the labor market and inflation are “more or less balanced,” the Fed said, repeating language from the statement released after the September meeting.
The new statement also slightly changed the reference to inflation, saying that price pressures had “progressed” toward the Fed’s target, rather than the previous language that they had “progressed further.”
The core PCE consumer inflation index, which excludes food and energy items and is a leading indicator of inflation, has changed little over the past three months, recording an annual rate of approximately 2.6% in September.
The Fed’s statement will be interpreted in light of Republican President-elect Donald Trump’s return to power in January.
Trump, who defeated Democratic Vice President Kamala Harris in Tuesday’s presidential election, campaigned on promises ranging from heavy tariffs on imports to a crackdown on immigration, which could have a broad and unpredictable impact on the outlook. economic crisis that the Fed will face in the coming months as officials try to keep inflation contained and close to the central bank’s target.
Fed Chair Jerome Powell, who was nominated by Trump in his first term to head the central bank and later clashed with the then president over interest rate policy in 2018 and 2019, will hold a press conference at 4:30 p.m. (from Brasília) to elaborate on the monetary policy statement and economic perspectives.
Investors had already reduced their bets that the central bank will be able to cut interest rates as much as expected after Trump’s election victory.
