The Federal Open Market Committee unanimously lowered the target range for the federal funds rate by one-quarter of a percentage point on Nov. 7.
The reduction, to 4.6 percent, came after the FOMC approved a 25-basis-point cut in September from a 40-year high of 5.3 percent. The FOMC cited continued economic expansion and easing labor market conditions in instituting the quarter-point cut. The unemployment rate remained at 4.1 percent for the third straight month in October as payroll job gains have slowed to 104,000 per month recently. Inflation fell to 2.4 percent in September from 9.1 percent in the summer of 2022. GDP increased at a 2.8 percent clip in the third quarter, unchanged from the second quarter.
In a press conference following the rate cut, FOMC Chair Jerome Powell said Donald Trump’s victory over Kamala Harris in the presidential election will have no impact on the committee’s policy decisions. Powell said the U.S. economy is strong and outpaces its global peers.
“We are not on any preset course,” Powell said. “We will continue to make our decisions meeting by meeting.”
Powell said he would not leave if President-elect Donald Trump asked him to resign. Trump has threatened to fire or demote the chair of the Federal Reserve, whose term ends in 2026. Powell said the president does not have the legal authority to do so.
Powell was noncommittal on whether the FOMC will reduce interest rates by a full percentage point in 2025. “We’re trying to steer between the risk of moving too quickly and perhaps undermining our progress on inflation and moving too slowly and allowing the labor market to weaken too much,” he added.
The FOMC said it remains committed to maximum employment and 2-percent long-term inflation, with both risks in balance. “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate,” according to the FOMC.
The Federal Reserve Summary of Economic Projections is projecting another interest rate cut next month, said Minneapolis Federal Reserve President Neel Kashkari. Speaking Nov. 10 on CBS “Face the Nation,” Kashkari said Trump’s pledge to carry out large deportations, if realized, could cause business disruptions. Kashkari was unsure of the impact of deportations on inflation.
Most market participants expected the FOMC would reduce interest rates 25 basis points, according to CME group’s Fedwatch. Sens. Elizabeth Warren (D-Mass.) and John Hickenlooper (D-Colo.) called on the FOMC to reduce its federal funds rate to 4.33 percent from 4.83 percent in a Nov. 4 letter to Powell.
