In his first announcement since the election, Fed Chair Jerome Powell emphasizes commitment to data-driven decisions
The United States Federal Reserve has announced it will cut its federal funds rate by 0.25 per cent following the conclusion of the Federal Open Market Committee (FOMC) meeting today.
The cut follows a 0.5 per cent cut in September, as well as the results of the US Presidential election which saw Donald Trump decisively defeat Kamala Harris. While Trump hinted at bringing the Fed under executive control during his campaign, the central bank remains an independent body.
Fed Chair Jerome Powell regularly insists upon the Fed’s decisions as data dependent. In the past month, however, economic data have been more mixed with US inflation surprising slightly to the upside.
“Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low,” a press release announcing the decision reads. “Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”
Bond yields have also climbed recently, in part due to the uptick in US inflation predictions and in part due to the expectation that the incoming Trump administration’s spending and tariff plans may contribute to inflation.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the release reads. “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
