WASHINGTON – The US Federal Reserve shrugged off concerns about the impact of Donald Trump’s election victory on interest rates and moved ahead with a quarter point cut on Nov 7, looking to continue easing borrowing costs on the back of cooling inflation.
The Fed sits just a short walk from the White House, where Democratic President Joe Biden will in January hand back the keys to Donald Trump following the Republican’s election win.
But as expected, Fed policymakers ignored the political drama playing out up the road, voting unanimously to reduce interest rates by 25 basis points to between 4.5 per cent and 4.75 per cent.
The decision should help ease the costs of mortgages and other loans – welcome news for consumers, who had widely cited the cost of living as a top concern ahead of the Nov 5 vote.
But the cost of borrowing will also depend on what the financial markets think a Trump victory means for the economy over the longer term, and where the Fed’s interest rates will need to settle to ensure inflation remains now.
“Labour market conditions have generally eased” since earlier in the year, the Fed said in a statement, noting ongoing progress to bring inflation down toward the bank’s long-term target of 2 per cent.
‘Economy looks quite resilient’
Trump’s victory came, at least in part, because of his ability to blame Biden’s administration for a post-pandemic surge in inflation which pushed up consumer prices by more than 20 per cent.
The Nov 7 cut builds on the Fed’s action in September, when it kicked off its easing cycle with a large cut of half a percentage-point, and penciled in additional rate reductions this year.
The Fed’s favoured inflation gauge has since eased to 2.1 per