The US Federal Reserve cut its key interest rate on Thursday by a quarter-point in response to the steady decline in the once-high inflation that had angered Americans and helped drive Republican Donald Trump’s presidential election victory this week.
The rate cut follows a larger half-point reduction in September, and reflects the Fed’s renewed focus on supporting the job market and fighting inflation, which now barely exceeds the central bank’s 2 percent target.
Asked at a news conference how Trump’s election might affect the Fed’s policymaking, Fed Chairman Jerome Powell said that “in the near term, the election will have no effects on our [interest rate] decisions.”
Photo: AFP
However, Trump’s election, beyond its economic consequences, has raised the specter of meddling by the White House in the Fed’s policy decisions. Trump has said that as president, he should have a voice in the central bank’s interest rate decisions.
The Fed has long guarded its role as an independent agency able to make difficult decisions about borrowing rates free from political interference.
Yet in his previous term in the White House, Trump publicly attacked Powell after the Fed raised rates to fight inflation, and he might do so again.
Asked whether he would resign if Trump asked him to, Powell, who would have a year left in his second four-year term as Fed chairman when Trump takes office, replied simply, “No.”
Powell said that in his view, Trump could not fire or demote him: It would “not be permitted under the law,” he said.
Thursday’s Fed rate cut reduced its benchmark rate to about 4.6 percent, down from a four-decade high of 5.3 percent. The Fed had kept its rate that high for more than a year to fight the worst inflation streak in four decades. Annual inflation has since fallen from a 9.1 percent peak in mid-2022 to a three-and-a-half-year low of 2.4 percent in September.
When its latest policy meeting ended on Thursday, the Fed in a statement said that the “unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2 percent target level, it “remains somewhat elevated.”
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