The Federal Reserve announced the third consecutive cut in its interest rate benchmark on Wednesday, a move widely anticipated by investors and financial markets.
The Fed cut its benchmark interest rate by a quarter of a percentage point, saying it will now target a range of 4.25 percent to 4.50 percent. The Fed has now cut the federal funds rate, a rate banks pay to borrow reserves from each other overnight, by 100 basis points—one percentage point—since it started cutting in September.
President-elect Donald Trump’s victory in November is already bringing about significant shifts in the economic landscape, with business confidence, investor confidence, and consumer confidence soaring
Trump’s promise to raise tariffs is widely seen as complicating the Fed’s task. Some economists have said that they expect tariffs lead to more inflation, although most analysts think a tariff would at most likely cause a one-time increase in some prices of imports, not the kind of broad, ongoing inflation that would prompt a reaction from the Fed.
As well, the president-elect’s promise to remove illegal aliens and tighten border security is seen by some as potentially raising labor costs, which could feed inflation by increasing the incomes of U.S. workers. That view, however, conflicts with claims by many economists that immigrant labor does not depress the wages of workers already in the U.S.
The promise of tax cuts and regulatory relief, as well as fossil fuel-friendly energy policies, has many businesses, investors, and households expecting more growth in the years ahead.
The president of the Federal Reserve Bank of Cleveland, Beth Hammack, voted against the cut, preferring to keep the rate unchanged. The eleven other members of the the Federal Open Market Committee voted for the cut, including Fed Govenor Michelle Bowman. Bowman supported the quarter point cut in Novembrer but voted against the Fed’s half-point cut in September.
Read the full article here
