Federal Reserve cuts interest rates, days after Trump’s election

The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, setting the latest path for borrowing costs just two days after the victory of President-elect Donald Trump.

The move comes two months after the Fed cut its benchmark interest rate by half a percentage point, reversing its years-long fight against inflation and delivering relief to borrowers burdened by high costs.

Speaking at a news conference in Washington, DC on Thursday, Fed Chairman Jerome Powell expressed optimism about the prospects for achieving a “soft landing” in which the US avoids a recession while inflation returns to normal.

“We remain confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained with inflation moving sustainably down to 2%,” Powell said.

The inflation path may change in the coming months. Trump’s proposals for increased tariffs and mass deportations of undocumented immigrants are widely expected to raise consumer prices, experts previously told ABC News.

Asked about the Fed’s potential response to Trump’s policies, Powell said the central bank would ultimately make its decisions based on how any policy changes could affect the economy.

“In the short term, the election will have no effect on our policy decisions,” Powell said Thursday. “We don’t know what the timing and content of any policy changes will be. We therefore don’t know what the effects on the economy will be.”

“We don’t guess, we don’t speculate, and we don’t assume,” Powell added.

The Federal Open Market Committee (FOMC), a policy-making body of the Fed, has predicted further rate cuts.

By the end of 2024, interest rates will fall another quarter of a percentage point from their current level to between 4.5% and 4.75%, according to FOMC projections. Interest rates will fall another percentage point during 2025, the projections further indicated.

In recent months, the US has moved closer to a “soft landing” where inflation returns to normal and the economy averts a recession.

Government data released last week showed robust economic growth over a recent three-month period, along with a continued cooling down of inflation.

U.S. hiring slowed in October, but fallout from hurricanes and labor strikes likely caused an undercount of the nation’s workers, data from the U.S. Bureau of Labor Statistics showed on Friday.

Since 2021, the Fed has tried to rein in inflation with increased interest rates. Even after the Federal Reserve cut its benchmark interest rate in September, it remains at a historic high.

Inflation has cooled dramatically from a peak of around 9% in 2022, hovering just near the Federal Reserve’s target rate of 2%.

Asked earlier about the 2024 election at a news conference in Washington, DC in December, Powell said, “We’re not thinking about politics.”

The election of Trump appears to have given a boost to the stock market. The US stock market soared at the opening of trade on Wednesday, just hours after Trump declared victory.

The Dow Jones Industrial Average rose more than 1,300 points, equivalent to a nearly 3% increase in the index. pThe &P 500 and the tech-heavy Nasdaq each rose more than 2%.

Shares of Tesla, the electric car company led by Trump ally Elon Musk, rose about 14.5% in early trading on Wednesday.