The U.S. central bank has cut interest rates, days after the country’s Presidential election.
The Federal Reserve’s decision, announced on Thursday (local time), is the second consecutive rate cut this year.
President-elect Donald Trump has previously suggested Federal Reserve Chair Jerome Powell is biased towards the Democrats (President Joe Biden’s party).
After announcing the bank’s latest rate cut, Powell told reporters that removing him from his position before the end of his term would be illegal.
The Federal Reserve
The U.S. Federal Reserve, often called the Fed, is the country’s central bank. It’s equivalent to the Reserve Bank of Australia (RBA).
Like the RBA, the Fed has a board of directors, whose key responsibility is setting the interest rate it charges commercial banks for short-term loans.
This rate influences the cost of borrowing across the economy.
Interest rates
The Fed lowered interest rates in September for the first time since the beginning of the pandemic.
It lowered them again today by a quarter of a percentage point, to a target range of 4.5% to 4.75%.
Powell said the board believes the U.S. “economy is strong overall.” He noted that “inflation has eased substantially”.
Inflation in the U.S. peaked at 9% in June 2022. The Federal Reserve’s goal is to bring it down to 2%.
Trump
Powell was nominated to lead the Fed’s board by Trump in 2017. He has remained in the role under President Biden. His current term as Chair ends in May 2026.
Earlier this year, Trump suggested Powell would “lower interest rates for the sake of maybe getting [Democrats] elected”, and said he would not re-hire him to the role.
At a press conference this week, reporters asked Powell about Trump and the future of his role as Fed chair.
