- The US Fed lowered interest rates to 4%-4.25% this Wednesday following President Trump’s constant nagging and threats against the central bank’s key personalities.
- Analysts expect at least one more rate adjustment before year’s end, with many suggesting two more coming our way.
The US Federal Reserve has finally made its move on the interest rates. After the Federal Open Market Committee (FOMC) meeting this Wednesday, the central bank pulled the trigger for a quarter-percentage point cut, putting the numbers to a range of 4.00% to 4.25%. This came amid the mounting pressure from the administration of President Donald Trump and analysts.
The latest interest rate cut is the first since December 18 last year, when the Fed adjusted the numbers to 4.25% to 4.50%. The US central bank notably had three rate modifications in 2024, starting with 4.75% to 5.00% on September 18 and 4.50% to 4.75% on November 7 before the last figures.
A Politically Charged Move?
The interest rate cut came amid August’s unfavorable inflation and jobs data. The Bureau of Labor Statistics earlier reported inflation rising to 2.9% and unemployment climbing to 4.3% during the period.
Usually, central banks increase interest rates to tame rising inflation and balance the people’s purchasing power. It encourages consumers to spend less and save more, with the expectation that it could reduce demand for goods and services.
Meanwhile, central banks typically lower interest rates when unemployment rises to stimulate economic activity and job growth. The lower cost of borrowing encourages enterprises to invest more in their businesses and human resources.
Despite all these factors at play, many news outlets like Politico believe the Fed’s move was likely politically motivated. They particularly attributed the central bank’s decision as a result of Trump’s constant nagging and threats against key personalities within the Fed, including telling the public that he would fire Fed Chair Jerome Powell and the ongoing legal drama with Fed Governor Lisa Cook.
More Cuts in Interest Rates
Analysts forecast at least one more interest rate slash this year, with many suggesting two consecutive cuts in the coming FOMC meetings in October and December. None other than Fed Governor Christopher Waller supported further adjustments.
Waller thinks the last figures exceeded the ideal interest rates by 1.0% to 1.5%. Hence, barring any untoward incidents in the economy, it means the figures could still drop as low as 2.75% to 3%.
What’s your Reaction?
+1
1
+1
0
+1
0
+1
0
+1
0
+1
0
+1
0
