Slowing inflation
US Federal Reserve lowers key interest rate by 0.25 percentage points
The US Federal Reserve (Fed for short) has lowered its interest rate by 0.25 percentage points following the US presidential elections. The range of key interest rates will be reduced to between 4.50 and 4.75 percent, it announced in Washington on Thursday.
The decision was unanimous. Bank economists had largely expected the rate cut of a quarter of a percentage point. Fed Chairman Jerome Powell explained that the US labor market had cooled overall.
In mid-September, the Fed had cut key interest rates by 0.50 points. This was the first reduction since the major wave of inflation.
Rate still above inflation target
The inflation rate fell to 2.4 percent in September. In 2022, this had still amounted to a good nine percent at times. However, the rate is currently still above the Fed's inflation target of two percent.
The interest rate meeting took place on a Thursday for a change. It was postponed by one day due to the presidential election. Donald Trump's election victory is also likely to be a topic at the press conference with Fed Chairman Powell.
Investors have recently been preparing for the interest rate cuts to end as early as the middle of next year and for the key monetary policy rate to end up in a range of 3.75 to 4.00 percent. This could cause a stir.
During his first presidency from 2017 to 2021, Trump openly called for low interest rates and even described Powell as an "enemy" because, in his view, interest rate hikes by the independent central bank unnecessarily slowed down growth.
Trump had promoted Powell to Fed Chairman at the beginning of 2018. Outgoing US President Joe Biden granted him a second term of office until May 2026, which Powell has said he intends to complete.
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