Key takeaways from the Fed’s third rate cut Federal Reserve Chair Jerome Powell at a news conference on November 7 in Washington, DC. The Federal Reserve on Wednesday cut interest rates by a quarter point, the third rate cut since it began to lower borrowing costs in September. The central bank’s latest move leaves its benchmark lending rate at a range of 4.25%-4.5%, a two-year low. The decision to cut was not unanimous, is an attempt to ease pressure on America’s economy from elevated interest rates to preserve the labor market’s health. Fed Chair Jerome Powell said the latest rate cut was “a closer call,” adding that recent inflation readings were “the single biggest factor” on officials’ minds during the meeting. Cleveland Fed President Beth Hammack was the lone dissenter on Wednesday’s decision, preferring to keep rates at their current levels. The Fed signaled in its policy statement that it is leaning toward holding rates steady in the future, since inflation remains stubbornly above the central bank’s 2% target. The US economy has also proved remarkably resilient in the face of elevated borrowing costs, giving the Fed some reassurance that it can stand pat without risking any undue economic damage. Fed officials penciled in just two rate cuts for next year, according to their latest forecasts, down from the four they projected in September. Officials also project slightly stronger economic growth, slightly lower unemployment, and for inflation in 2025 to be higher than they previously thought. The projections overall suggest Fed officials expect the US economy next year to be buoyant, with no recession in sight. They expect inflation to reach their target over a longer period than they previously estimated, not touching 2% until 2027. Related article Dow plunges more than 1,100 points and marked its longest losing streak since 1974 Powell sang the US economy’s praises in his post-meeting news conference, saying its strength has been “the story” of the year. Powell affirmed the likelihood of fewer rate cuts next year that the projections showed. That sent markets into a tailspin, with the Dow dropping by more than 1,000 points. Some investors are bullish on the prospects of strong growth next year, which could come about from the policies of President-elect Donald Trump. The incoming administration promises extending the 2017 tax cuts and cutting down on regulations — policies poised to boost growth if they’re enacted. However, Trump’s threat of massive tariffs on goods coming from Mexico, Canada and China could derail the Goldilocks economy the Fed has seen so far, since the stiff tariffs Trump has floated are widely expected to stoke inflation.
key-takeaways-from-the-feds-third-rate-cut-federal-reserve-chair-jerome-powell-at-a-news-conference-on-november-7-in-washington-dc-the-federal-reserve-on-wednesday-cut-interest-rates-by-a-q

Key takeaways from the Fed’s third rate cut

Federal Reserve Chair Jerome Powell at a news conference on November 7 in Washington, DC.

The Federal Reserve on Wednesday cut interest rates by a quarter point, the third rate cut since it began to lower borrowing costs in September.

The central bank’s latest move leaves its benchmark lending rate at a range of 4.25%-4.5%, a two-year low.

The decision to cut was not unanimous, is an attempt to ease pressure on America’s economy from elevated interest rates to preserve the labor market’s health.

Fed Chair Jerome Powell said the latest rate cut was “a closer call,” adding that recent inflation readings were “the single biggest factor” on officials’ minds during the meeting. Cleveland Fed President Beth Hammack was the lone dissenter on Wednesday’s decision, preferring to keep rates at their current levels.

The Fed signaled in its policy statement that it is leaning toward holding rates steady in the future, since inflation remains stubbornly above the central bank’s 2% target. The US economy has also proved remarkably resilient in the face of elevated borrowing costs, giving the Fed some reassurance that it can stand pat without risking any undue economic damage.

Fed officials penciled in just two rate cuts for next year, according to their latest forecasts, down from the four they projected in September. Officials also project slightly stronger economic growth, slightly lower unemployment, and for inflation in 2025 to be higher than they previously thought.

The projections overall suggest Fed officials expect the US economy next year to be buoyant, with no recession in sight. They expect inflation to reach their target over a longer period than they previously estimated, not touching 2% until 2027.

Related article Dow plunges more than 1,100 points and marked its longest losing streak since 1974

Powell sang the US economy’s praises in his post-meeting news conference, saying its strength has been “the story” of the year. Powell affirmed the likelihood of fewer rate cuts next year that the projections showed.

That sent markets into a tailspin, with the Dow dropping by more than 1,000 points.

Some investors are bullish on the prospects of strong growth next year, which could come about from the policies of President-elect Donald Trump. The incoming administration promises extending the 2017 tax cuts and cutting down on regulations — policies poised to boost growth if they’re enacted.

However, Trump’s threat of massive tariffs on goods coming from Mexico, Canada and China could derail the Goldilocks economy the Fed has seen so far, since the stiff tariffs Trump has floated are widely expected to stoke inflation.