Fed cuts rates again to support US economy amid declining inflation

The Federal Reserve reduced its key interest rate by a quarter-point on Thursday,marking a second straight rate cut as the central bank seeks to support the economy amid declining inflation.  Following a larger half-point reduction in September, Thursday’s adjustment brings the Fed's rate down to 4.6%, a notable retreat from the 5.3% level maintained for more than a year to counter record-high inflation.
Inflation has receded from a 9.1% peak in 2022 to a manageable 2.4% as of September, edging closer to the Fed’s 2% target. The Fed’s latest statement highlighted a stable job market with a low unemployment rate, despite a modest increase recently. While further rate cuts were previously projected, the economy’s current resilience and anticipation of higher inflation under President-elect Donald Trump may temper the Fed’s pace in easing policy. Wall Street responded positively, with stocks rising on the news as investors saw continued Fed support for growth,noted experts.
The unemployment rate has moved up but remains low,” the Fed reportedly stated, highlighting a stable job market as it continues to align inflation with the central bank's goal. This dual focus on employment and inflation reflects an evolving economic strategy as the Fed responds to a shifting fiscal landscape, including anticipated changes under President-elect Donald Trump, who has signaled increased government spending and tax cuts.
With the Fed's benchmark rate now at 4.6%, down from the 5.3% high set to counter inflation, further rate cuts may become less likely. Following the September cut, Fed officials initially projected that additional quarter- point cuts could extend into November, December, and next year. However, with a strong economy and Wall Street preparing for faster growth and potential inflationary pressures under Trump’s policies, the Fed may soon pause its rate-cutting cycle.
Following the rate cut, U.S. stocks moved higher, reflecting investor confidence in the Fed’s continued support for economic growth. The Dow Jones and S&P 500 indexes posted gains, bolstered by expectations of sustained consumer spending and corporate earnings growth in a low-rate environment. While markets remain cautiously optimistic, analysts suggest that the Fed’s future moves will hinge on emerging economic data and any fiscal changes introduced by the new administration.

(Business Correspondent)