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The rate cut follows a larger half-point cut in September and reflects the Fed’s renewed focus on supporting the labor market as well as fighting inflation, which is now barely above the central bank’s 2 percent target.
Thursday’s move cuts the Fed’s benchmark rate to around 4.6 percent, down from a four-decade high of 5.3 percent before the September meeting.
The Fed has kept its rate that high for more than a year to combat the worst run of inflation in four decades. Annual inflation has since fallen from a peak of 9.1 percent in mid-2022 to a three-and-a-half-year low of 2.4 percent in September.
In a statement after the end of its last meeting, the Fed said “the unemployment rate rose but remains low,” while inflation fell closer to the central bank’s target but “remains somewhat elevated.”
After cutting interest rates in September – their first such move in more than four years – Fed policymakers predicted they would make additional cuts by a quarter of a point in November and December and four more next year.
But with the economy now largely solid and Wall Street predicting faster growth, larger budget deficits and higher inflation under a Trump presidency, further rate cuts may have become less likely.
Trump’s election also raised the specter of White House meddling in Fed policy decisions, with Trump saying that as president he should have a say in the central bank’s interest rate decisions.
The Fed has long maintained its role as an independent institution capable of making tough decisions on borrowing rates, without political interference.
Still, during his previous tenure in the White House, Trump publicly attacked Chairman Jerome Powell after the Fed raised rates to fight inflation, and he may do so again.
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