Federal Reserve to cut interest rates by a quarter point

jerome-powell-flickr-640x480 Federal Reserve via Flickr

Important Takeaways:

  • The Federal Reserve announced the second consecutive cut in its interest rate benchmark on Thursday, a move widely anticipated by investors.
  • The Fed said it will now target a range of 4.50 percent to 4.75 percent for the federal funds rate, the rate banks charge each other to borrow reserves, one-quarter of a point below the target announced in September.
  • This marks a moderated approach compared to the Fed’s earlier, sharper 50 basis point cut in September, reflecting a recalibration of monetary policy. The Fed’s decision to announce the larger rate cut in September, just weeks before the presidential election, was widely criticized by Republicans as creating the appearance of inappropriate politicization.
  • President-elect Donald Trump’s victory, coupled with expected Republican majorities in Congress, could set the stage for significant shifts in the economic landscape, with potential changes to taxes, spending, immigration, and trade policies on the horizon. This anticipated alignment in Washington has fueled a rally in stocks, with many investors expecting economic growth to be recharged by Trump’s policies.

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