Interest Rates

Federal Reserve Chair Jerome Powell had to reassure some skeptical colleagues that the central bank wouldn’t inadvertently send signals of distress when he led them to start lowering borrowing costs at the end of the summer with a gutsy, larger-than-usual half-point reduction.

Now, they are confronting another potential hinge point. Officials lowered their benchmark rate again in November, by a quarter point. Investors widely expect a third consecutive rate cut this week.

Expectations for a December interest rate cut remained strong after the Federal Reserve trimmed rates by a quarter percentage point in November, but market pricing is suggesting the likelihood of a “skip” in January.

On Thursday afternoon, the U.S. central bank lowered the federal funds rate, which determines what banks charge each other for overnight lending, to a target range of 4.5% to 4.75%.

The Federal Reserve cut its benchmark lending rate again Thursday, the second time this year as inflation continues to slow.

The quarter-point move comes as the US economy faces a new direction and a new president.

Voters in the US presidential election frequently noted that the economy, and especially higher price levels, were a deciding factor in their decision making.

The Federal Reserve lowered the federal funds rate for a second consecutive time Thursday, but the economic policies floated by President-elect Donald Trump have some economists questioning the path of interest rates heading into next year.

At the conclusion of the policy-setting Federal Open Market Committee’s two-day meeting, the central bank announced it cut the federal funds rate by 25 basis points to 4.5% to 4.75%, the lowest level since March 2023.

The Federal Reserve announced Thursday that it would lower its federal funds rate target range by 0.25% in a push to boost the U.S. economy.

The Fed’s decision to lower the range to between 4.50% and 4.75% follows a September cut of 0.50% as inflation decelerates and the labor market softens. The previous rate cut was preceded by several democratic senators calling for an aggressive move from the Fed, with speculation that a large cut could help boost Vice President Kamala Harris’ perception with voters ahead of the presidential election.

Inflation came in hotter than expected last month — dimming hopes for another big interest rate cut from the Federal Reserve next month.

The Consumer Price Index rose 2.4% versus a year ago in September, slightly above the 2.3% increase economists had expected, the Labor Department said on Thursday.

Month-over-month, the CPI rose 0.2% — steeper than the 0.1% increase economists had expected but even with the 0.2% number from August.

The U.S. labor market strengthened in the weeks before Election Day, as job growth accelerated and the unemployment rate ticked lower. 

U.S. employers added 254,000 jobs last month, the Labor Department said Friday. That was the largest monthly increase since March. The unemployment rate slipped to 4.1%. 

The numbers beat expectations from economists surveyed by The Wall Street Journal. They expected payrolls to increase by 150,000 in September, and the unemployment rate to hold at 4.2%.

The Federal Reserve announced its first interest rate cut in four years Wednesday, one of its most consequential decisions in recent memory, a move likely to be panned by former President Donald Trump and celebrated by Vice President Kamala Harris.

Interest rates can become a hot-button issue around elections, considering lower rates are a much more popular policy as they can boost personal finances with cheaper mortgages and lower interest on student and small business loans.

Republican candidate Donald Trump said on Thursday that U.S. presidents should have a say over decisions made by the Federal Reserve, the most explicit indication so far of his interest in infringing on the central bank's independence should he regain the White House.

Was it “political” for the Federal Reserve to cut interest rates less than two months before the presidential election, as Donald Trump has charged? Not a bit. Not cutting rates is what would have been political.