The US Federal Reserve cut interest rates by 25 basis points amid cooling inflation and a sluggish labor market, marking the second rate cut in the easing cycle.
“Since the beginning of the year, labor market conditions have generally eased, and the unemployment rate has risen but remains low. Inflation has moved toward the Committee’s 2 percent objective but remains somewhat elevated,” the Federal Open Market Committee (FOMC) , the central bank’s policy-making body, said Thursday in a statement.
To support its objectives, the committee decided to reduce the target rate of the federal funds rate by 0.25 percent to 4.5 percent to 4.75 percent, the statement said.
The Fed’s latest decision came after a weak employment report, which showed that US employers added only 12,000 jobs in October, amid a sluggish labor market. This reduction increased the strike and impact of recent typhoons, Xinhua news agency reported.
The latest report also revised up employment in August and September, with a gain of 78,000 and a gain of 223,000, respectively. With these updates, employment for the two months combined is 112,000 lower than previously reported.
After its September 17-18 meeting, the central bank lowered the target rate of the federal funds rate by 50 basis points, marking the first rate cut in four years and marking the start of an easing cycle.
In a press conference after the Fed’s two-day policy meeting, Fed Chairman Jerome Powell noted that inflation has slowed significantly over the past two years, but core inflation remains somewhat high.
Total Personal Consumption Expenditures (PCE) prices — the Fed’s preferred inflation gauge — rose 2.1 percent during the 12 months ending in September. Excluding the volatile food and energy categories, core PCE prices rose 2.7 percent.
“A job is not done with inflation,” said Powell.
The Fed chairman noted that the committee is in the process of “resetting” from the “target rate,” noting that the target range for the federal funds rate has been lowered by 75 basis points following two consecutive cuts.
Powell acknowledged that while the economy is doing well, Americans are still feeling the effects of higher prices.
“It takes some years to get real wages for people to feel better,” he said.
The latest FOMC meeting came shortly after the 2024 US presidential election, in which former President Donald Trump — the Republican nominee — won in landslides on issues including inflation, immigration, and Middle East conflicts.
Powell said that in the near term, the election will not affect the Fed’s policy decisions.
“Specifically, how important those (new) policies will be and to what extent in achieving our goals flexibility, high employment, and price stability, we do not speculate, we do not speculate, and we do not think,” he added.
When asked if he would step down if President-elect Donald Trump asked him to resign, Powell responded with a firm “no”.
Asked if he believed the incoming President had the power to fire him, the Fed chairman replied, “It’s not allowed under the law.”