The Federal Reserve is expected to announce a 0.25 percentage point cut to its key lending rate, lowering it to a target range of 4% to 4.25%. This will mark the first reduction since December 2022. The decision comes amid discussions of economic challenges, particularly concerns regarding a stagnating job market.
A rate cut is anticipated to reduce borrowing costs throughout the United States. This adjustment aligns with trends in other countries where central banks have already lowered rates. Despite previous hesitations, recent data indicating weak job growth, including a loss in employment figures earlier this year, has contributed to a consensus among Fed members regarding the necessity of this cut.
Inflation has risen in the U.S. recently, with a 2.9% increase over the past year, which exceeds the Fed’s target of 2%. However, the overarching concern appears to be the softness in the labor market. Some analysts, including Sarah House from Wells Fargo, suggest that the Fed is motivated by a desire to avoid further economic deterioration, as labor market shifts can occur rapidly.
President Trump has been vocal about his dissatisfaction with the Fed’s previous rate policies, advocating for more substantial cuts. He has publicly criticized Chairman Jerome Powell, suggesting that the current rates are too high and impede economic growth. Trump’s administration has signaled its desire for changes within the Fed’s structure, including recent appointments and threats of reevaluation of Fed members.
Despite Trump’s influence and criticism, analysts believe that the Fed’s decision to cut interest rates would likely have been made regardless of external pressures. Comments from financial strategists indicate that while presidential policies may influence economic conditions, they do not necessarily dictate the Fed’s operational independence.
Source: https://www.bbc.com/news/articles/c3e75y90pw0o?at_medium=RSS&at_campaign=rss