New York, Dec 11 (LatestNewsX) – The Federal Reserve trimmed the benchmark interest rate by a quarter‑percentage point, sliding it into the 3.5 % to 3.75 % band. The decision was framed as a balancing act, tackling inflation while easing a labor market that appears to be softening.
After announcing the cut Wednesday, Fed Chair Jerome Powell said, “We are trying to keep inflation under control, but also support the labour market and strong wages, so that people are earning enough money, and feeling economically healthy again.” He added, “We have an extraordinary economy.”
Wall Street reacted positively: at the market close, the Dow Jones climbed nearly 500 points, a 1.05 % gain.
The Fed’s policy rate, also known as the overnight rate, sets the benchmark for interbank borrowing and ripples through the broader economy, influencing business loan rates, mortgages, and credit‑card costs for consumers. It also has an impact on rates overseas.
This latest cut marks the third rate reduction under President Donald Trump, who first returned to office in January. The changes came in September, October, and now, a sequence that has Trump somewhat uneasy. After meeting with business leaders, he remarked that a 0.50‑point decline might have been more suitable.
Diverging from Powell’s caution around inflation, Trump argued, “You can have tremendous growth without inflation. Everything goes up with the growth, but that’s not inflation.”
Powell, a Trump appointee in 2018, is slated to finish his term in May next year. President Trump is evaluating potential successors from a shortlist presented by Treasury Secretary Scott Bessent. He indicated plans to interview one candidate, former Fed Governor Kevin Warsh, this Wednesday.
Trump has routinely criticized Powell and hinted at the possibility of removal, a prospect that may hinge on a Supreme Court ruling concerning presidential authority over independent agencies. In a recent hearing, the justices expressed doubt that the Fed chair falls under these powers.
Powell has also attributed part of the inflation rise to U.S. tariffs. He stated, “If you get away from tariffs, inflation is in the low 2s (that is, 2 per cent range). It is really tariffs that are causing most of the inflation overshoot.” Inflation currently sits at 3 %.
Regarding labor market dynamics that influenced the rate cut, Powell noted, “Gradual cooling in the labour market has continued” and that unemployment had risen three-tenths of a percent between June and September. The unemployment rate was 4.4 % in September.
(Arulk Louis can be contacted at arul.l@ians.in)
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