Newsman: The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, setting the latest path for borrowing costs just two days after the victory of President-Elect Donald Trump.
Speaking at a press conference in Washington, D.C. on Thursday, Fed Chair Jerome Powell voiced optimism about the prospects for achieving a “soft landing,” in which the U.S. averts a recession while inflation returns to normal.
“We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%,” Powell said.
When asked about the Fed’s potential response to Trump’s policies, Powell said the central bank would ultimately make its decisions based on how any policy changes could impact the economy.
“In the near term, the election will have no effects on our policy decisions,” Powell said on Thursday. “We don’t know what the timing and substance of any policy changes will be. We therefore 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), a policymaking body at the Fed, has forecast further interest rate cuts.By the end of 2024, interest rates will fall another quarter of a percentage point from their current level of between 4.5% and 4.75%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections further indicated.
In recent months, the U.S. has inched closer to a “soft landing,” in which inflation returns to normal and the economy averts a recession.
Since 2021, the Fed has sought to rein in inflation with elevated interest rates. Even after the Federal Reserve cut its benchmark interest in September, it still stands at a historically high level.
Inflation has cooled dramatically from a peak of about 9% in 2022, hovering right near the Federal Reserve’s target rate of 2%.
The election of Trump appears to have delivered a boost for the stock market. The U.S. stock market soared at the open of trading on Wednesday, just hours after Trump declared victory.
