Fed cuts rates by a quarter point as Powell ignores Trump-fuelled inflation risk

The US Federal Reserve cut its benchmark interest rate by 0.25 percentage points on Thursday, bringing the federal funds rate to a range of 4.5% to 4.75% — its lowest level since February 2023.

The quarter-point cut follows a more aggressive 0.5% reduction in September, underscoring a measured approach as the Fed assesses economic conditions and inflation trends.  

"This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to support progress on inflation as we move toward a more neutral stance over time," Fed Chair Jerome Powell stated in his press conference. 

"Even with today's cut, the policy is still restrictive," he added.  

The Fed’s November statement noted that the US economy is growing at a "solid pace," with GDP rising at an annual rate of 2.8% in the third quarter.  

"Growth of consumer spending has remained resilient," Powell said. 

Easing inflation, however, remains "somewhat elevated", with core Personal Consumption Expenditure (PCE) inflation – the Fed's favorite price index measure – holding at 2.7% year-on-year, above the Fed's target. 

Labour market conditions also remain solid, despite recent disruptions from worker strikes and hurricanes.

Powell noted that October job creation figures would have been better if it weren't for these factors.

In October, nonfarm payrolls rose by only 12,000, well below the expected 115,000 and sharply down from September’s 223,000 growth.  

The Fed reaffirmed its commitment to a data-dependent approach, with no fixed path for future rate adjustments.

The central bank also left its balance sheet reduction plan unchanged, signalling a steady approach to quantitative tightening.

By choosing not to reinvest