(Bloomberg) — The Federal Reserve cut its key interest rate by a quarter of a percentage point on Thursday and expanded efforts to keep the U.S. economic expansion on solid footing.
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Officials voted unanimously to lower the federal funds rate to a range of 4.5% to 4.75%. The adjustment follows a larger reduction of half a point in September.
“This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time,” Fed Chairman Jerome Powell said at a press conference. in Washington after the decision.
Powell also said the US presidential election will have “no impact” on the central bank’s policy decisions in the short term. He noted that it is still too early to know the timing or substance of possible changes in fiscal policy.
The decision follows the re-election this week of Donald Trump, who has promised to impose more aggressive tariffs, crack down on immigration and expand tax cuts. These policies could put upward pressure on prices and long-term interest rates and prompt the Fed to reverse interest rate cuts in the coming months.
Fed officials could also see their decisions under increased scrutiny, given Trump’s history of publicly criticizing Powell.
In the Federal Open Market Committee statement, officials said “risks to achieving employment and inflation targets are broadly balanced.”
“The economic outlook is uncertain and the committee is alert to the risks to both sides of its dual mandate,” the Fed statement said.
Policymakers stopped short of adding a statement about achieving “greater confidence” that inflation is moving sustainably toward 2%, although they noted that inflation has “made progress” toward the central bank’s target.
The committee has also slightly adjusted its language regarding the labor market.
“Since earlier this year, labor market conditions have generally eased and the unemployment rate has increased, but remains low,” the Fed statement said. Powell described the labor market as “solid.”
After beginning the Fed’s easing cycle with an excessive rate adjustment, policymakers have said they favor a more moderate and careful approach to future rate cuts.
Robust economy
The US economy grew at an annual rate of 2.8% in the third quarter, fueled by a rebound in consumer spending. Concerns about the looming weakening of the labor market have also subsided, but data still points to a cooling trend.
