Federal Reserve lowers interest rates, anticipates continued decrease
Federal Reserve Lowers Interest Rates as Economic Uncertainty Persists
The Federal Reserve has made a move to lower interest rates in response to growing economic concerns and the potential impact of trade policies. In a recent meeting, the Fed's rate-setting committee decided to lower borrowing costs by a quarter of a percentage point, bringing the policy rate to the 4%-4.25% range.
The decision was supported by most of President Donald Trump's central bank appointees, including Fed Governor Christopher Waller, who had previously expressed concerns about the weakening US labor market. Waller, along with Michelle Bowman, voted in favor of the rate cut after opposing the July decision to keep rates unchanged.
The Fed's move indicates that they have begun to downplay the risk that trade policies will stoke persistent inflation. Officials now project that they can head off any rise in unemployment with a faster pace of rate reductions, while inflation eases slowly next year. The new projections show an emerging sense among officials that they can manage the economic impacts of trade policies effectively.
However, the Fed's governing body is not without concerns. They are worried about weakening growth and the likelihood of rising unemployment. Chair Jerome Powell has stated that, in the near term, risks to inflation are tilted to the upside and risks to employment to the downside. The projection for economic growth is slightly higher at 1.6%, compared to 1.4% in June. The projection for unemployment remains unchanged at 4.5%.
The latest forecasts are consistent with the view that tariffs have a temporary impact on inflation. Job gains have slowed, and the unemployment rate has edged up. Despite these challenges, the Fed expects to lower borrowing costs further this year, with two more quarter-percentage-point reductions anticipated.
Not all members of the Fed's governing body agreed with the decision. Governor Stephen Miran dissented, favoring a half-percentage-point cut instead. Miran, who recently joined the Board of Governors, has penciled in the steepest rate cuts in projections issued after he joined.
In a notable development, Fed Governor Lisa Cook voted in favor of the decision, despite Trump's effort to fire her. After two courts supported her challenge of his attempted dismissal, Cook was able to remain in her position.
The "dot plot," a visual representation of the individual rate projections of Fed officials, shows one rate projection of 2.875% for the end of 2025, three-quarters of a percentage point below the next lowest one. This indicates a general consensus among officials for lower interest rates in the future.
Overall, the Federal Reserve's decision to lower interest rates reflects a cautious approach to managing economic uncertainty. As trade policies and their impacts continue to evolve, the Fed will likely remain vigilant in their efforts to maintain a stable economy.
Read also:
- Trade Disputes Escalate: Trump Imposes Tariffs, India Retaliates; threatened boycott ranges from McDonald's, Coca-Cola to iPhones
- Aquatech purchases Koch's Direct Lithium Extraction business, merging Li-ProTM DLE technology into the PEARLTM Technology Platform.
- Nepal's Journey: Evolution from Street Life to Political Power
- Li Auto faces scrutiny after crash test involving i8 model and a truck manufacturer sparks controversy
