The US Federal Reserve Bank cut interest rates by 25 basis points for the third time in a row, in support of the US labor market after cracks appeared, taking advantage of relatively stable inflation in the United States.
According to Bloomberg, the Federal Open Market Committee voted on Wednesday to cut the benchmark interest rate to a range of 3.5% and 3.75%, marking the third cut in borrowing rates since Donald Trump took office, after keeping it unchanged in five consecutive meetings.
Today’s Federal Reserve decision comes amid delays and the absence of official economic data due to the longest government shutdown in the United States, which lasted throughout October and much of November, and which caused the cancellation of the October inflation and jobs reports, contributing to a deepening division among Federal Reserve officials regarding today’s decision.
The Federal Reserve is currently experiencing a rare split among members of the Monetary Policy Committee between two groups; the first is concerned about inflation becoming entrenched at high levels, while the second group is worried about the cracks in the American labor market.
Federal Reserve officials believe that after cutting interest rates twice this fall, and by 1.5 percentage points over the past 15 months, each additional cut will bring the Fed's funding rate closer to a level that could stimulate economic activity, something many of them are trying to avoid.
The Fed’s move today was in line with market expectations prior to the decision, as traders believed that the probability of a rate cut today was higher than 90%, especially after the statement by New York Federal Reserve Governor John Williams, who is seen as close to Powell, that he sees room for a cut “in the near term.”.
Minutes before the Fed's decision, White House economic adviser Kevin Hassett said a 25-basis-point rate cut would be a "small step" in the right direction, adding that the Fed "will probably need to do more on interest rates." Hassett, the frontrunner for Trump's nomination to head the Fed, had indicated in remarks the previous day that he saw considerable room for the Fed to significantly lower its benchmark interest rate.
Announced layoffs declined in November, although some of the largest U.S. companies, such as Amazon and Verizon Communications, made headlines with plans to reduce their workforce.
Consumer spending remained largely unchanged in September, while the Federal Reserve's preferred inflation gauge rose slightly to 2.8%, about a full percentage point above the central bank's target.
