Fed cuts interest rates amid questions over its fight to lower inflation

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Fed cuts interest rates amid questions over its fight to lower inflation
Author: Callum Jones in New York
Published: Dec, 18 2024 19:09

Central bank lowers the benchmark federal funds rate by a quarter of a percentage point. The US Federal Reserve cut interest rates on Wednesday amid questions over its fight to bring down inflation across the world’s largest economy. Policymakers at the central bank lowered the benchmark federal funds rate by a quarter of a percentage point to a range of between 4.25% and 4.5% in its last rate decision before Donald Trump assumes the presidency in January.

The central bank also suggested that it would make fewer rate cuts than expected in 2025. While inflation has fallen dramatically since peaking at its highest rate in a generation two summers ago, it remains higher than the Fed would like – and has increased in recent months.

The wider US economy remains robust, with employers adding an estimated 227,000 jobs in November. But the stickiness of price growth has raised concern over the progress of efforts to bring it down to normal, pre-pandemic levels. Nevertheless, the Fed chair, Jerome Powell, is optimistic that things are ticking along nicely. “I feel very good about where the economy is and where monetary policy is,” he said earlier this month.

Americans’ frustration over a surge in prices in recent years has been cited as a key factor behind the election victory of Donald Trump, who repeatedly pledged on the campaign trail to bring them down. But even the president-elect has since conceded that this pledge – which drew skepticism from many economists – will be no mean feat.

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