After months of debate and pressure from US President Donald Trump, the Federal Reserve cut interest rates on Wednesday. The US central bank lowered its key lending rate by 0.25 percentage points, setting the new range at 4% to 4.25%, the lowest since late 2022. This move marks the Fed’s first rate cut since last December and signals the start of likely further reductions in the coming months to ease borrowing costs across the country.
Despite the rate cut, the Fed issued caution about the economy, highlighting concerns over a weakening job market. Federal Reserve Chairman Jerome Powell noted in a news conference that while unemployment remains low, “downside risks” have emerged, reflecting a shift from the Fed’s July outlook that described the labor market as “solid.
The decision was backed by 11 of 12 voting members of the Fed committee, with Stephen Miran, temporarily on leave from Trump’s Committee of Economic Advisers, advocating for a larger 0.5 percentage point cut.
The rate reduction was expected, as inflation, which surged after the pandemic and led to multiple rate hikes in 2022, has eased considerably. Central banks in the UK, Europe, Canada, and other regions have already reduced rates. Within the Fed, policymakers had anticipated cutting borrowing costs by at least half a percentage point this year.
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