Changes in Recent Economic Indicators Prompt Fed to Cut Key Interest Rate

The highly anticipated news of an interest rate cut finally arrived on Wednesday, September 17, the Federal Reserve Open Market Committee (FOMC) announcing decisions to lower its key fund interest rate by ¼ percentage point — the first reduction since December. Contributing to the decision is the slowing job gains in recent months and the unemployment rate ticking higher, prompting the central bank to shift its focus quickly from inflation. Although investors more optimistically projected five cuts for the rest of this year, Fed officials signaled a more moderate two additional reductions and just one in 2026. However, there was reportedly a wide divergence among the 19 officials on the Fed’s rate-setting committee, AP’s press release noting that “seven policymakers indicated they don’t support further cuts, while two supported just one more and 10 favor at least two more,” Fed Chair Jerome Powell attributing it to the uncertain outlook of the economy since even as hiring has stumbled, inflation remains stubborn, having risen 2.9% in August from a year ago and up from 2.7% in July. FOMC’s decision of the rate cut is in contrast to many other central banks overseas, AP’s article citing the European Central Bank which” left its benchmark rate unchanged, as inflation has largely cooled and the economy has seen limited damage, so far, from U.S. tariffs; and while inflation in England remains higher that in the U.S at 3.8%, the Bank of England is also expected to keep its rate on hold.

Source:    https://apnews.com/article/federal-reserve-inflation-trump-2d05401d7c9cb2393925f494aac71d89