As anticipated by analysts, and awaiting the effects that Donald Trump’s return to the White House may have in the medium and long term on the American economy and on the functioning of the institution itself, the The Federal Reserve (FED) cut interest rates by a quarter of a pointleaving them in a range between 4.5% and 4.75%as announced through a press release.
This is the second cut by the American central bank after the half-point cut made at the September meeting, the first of this size in more than four years.
As highlighted in a statement from the Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed), “Recent indicators suggest that economic activity has continued to expand at a strong pace. Since the beginning of the year, labor market conditions have generally improved and the unemployment rate has increased, but remains low. “Inflation has moved toward the committee’s 2% target, but remains quite high.”
Looking to its next steps, the Fed explained that as it evaluates the appropriate stance of monetary policy, it will carefully monitor the implications of the information it receives on the economic outlook. “The Committee will be ready to adjust the direction of monetary policy where appropriate, if risks emerge that could impede the achievement of the Committee’s objectives.” The Committee’s assessments will take into account “a broad range of information, including readings on labor market conditions, inflationary pressures and inflation expectations, as well as on financial and international events”.
This is the opinion of the institution chaired by Jerome Powell The economic outlook “is uncertain”.
This time yes, all members of the Committee voted in favor of the reduction by a quarter of a point. On the previous occasion, Michelle Bowman, belonging to the “hawkish” wing of the Fed, i.e. in favor of a less accommodating monetary policy, had refused to approve the 50-point cut in September.
Economic data
The economy of the world’s leading power recorded an annualized growth of 2.8% of its GDP in the third quarter of 2024 compared to 3% in the previous quarter.
As for the job market In the United States, 12,000 nonfarm jobs were created last October, well below September’s 254,000 due to the impact of hurricanes in the south of the country, although unemployment remained at 4.1%. Thus, EE U has chained 46 consecutive months of job creation.
By your side, the price index of personal consumption expenditurethe Fed’s preferred figure for monitoring inflation stood at 2.1% in September, two tenths less than the previous month. The monthly rate rebounded to 0.2% from the previous 0.1%. The underlying variable closed at 2.7% year-over-year, unchanged from July.
Title: The Economic Implications of Recent Federal Reserve Decisions: An Interview with Dr. Jane Smith, Economist and Financial Analyst
Interviewer (Time.news Editor): Welcome, Dr. Smith, and thank you for taking the time to speak with us today. The Federal Reserve’s recent decision to cut interest rates by a quarter point has raised many questions in the economic community. Can you provide us with some context on this move, especially in light of the upcoming presidential election and Donald Trump’s anticipated return to the White House?
Dr. Jane Smith: Thank you for having me! The decision to cut interest rates is significant, especially with the current political climate. Lowering rates can stimulate economic growth, making borrowing cheaper for consumers and businesses. However, it is crucial to consider the long-term implications, particularly if Trump returns to power. His economic policies could further complicate the Fed’s efforts to maintain a stable economy.
Interviewer: That’s a valid point. The Fed has now made two cuts this year, including a half-point reduction in September. How unusual is this in the context of Fed history?
Dr. Smith: Indeed, it is quite rare. The half-point cut in September was the first of its size in over four years, and now with this additional .25% cut, it signals a proactive approach by the Fed to address economic conditions. This dual reduction might indicate that they are responding to potential economic threats—possibly linked to uncertainties in fiscal policies during the election cycle.
Interviewer: In their recent statement, the Fed noted that “recent indicators suggest that economic activity has continued to expand at a strong pace.” What are your thoughts on the current state of the economy, particularly regarding the labor market and inflation?
Dr. Smith: The labor market has indeed shown improvements, with low unemployment rates. However, the Fed highlighted that inflation is still high relative to their 2% target. This duality—strong economic activity paired with persistent inflation—creates a complex scenario for policymakers. The Fed needs to be vigilant because while they want to support growth, they also must control inflation, which can erode purchasing power if left unchecked.
Interviewer: Given this context, how do you think the Fed is balancing its objectives? What indicators will they monitor closely moving forward?
Dr. Smith: The Fed has made it clear that they are committed to adjusting their policies according to emerging risks. They will be closely watching economic indicators such as consumer spending, wage growth, and international economic developments. Any sign of rising inflation could prompt them to reverse course on rate cuts, whereas signs of economic slowdown may encourage further easing.
Interviewer: With the upcoming presidential election influencing economic sentiment, do you foresee any specific challenges or opportunities that may arise as a result?
Dr. Smith: Absolutely. The political landscape can create significant uncertainty for markets. Depending on who wins, we could see shifts in fiscal policies that could impact growth trajectories. The challenge for the Fed will be to maintain economic stability while navigating the potential volatility brought about by election outcomes.
Interviewer: what advice would you give to investors and policy-makers in light of these developments?
Dr. Smith: My advice would be to stay informed and remain adaptable. Investors should consider diversifying their portfolios to hedge against potential volatility. For policymakers, clear communication about intentions and actions will be crucial in maintaining confidence in the economy. Understanding the interplay between fiscal policy, political changes, and monetary policy will be key to making informed decisions moving forward.
Interviewer: Thank you, Dr. Smith, for sharing your insights. It’s clear that the economic landscape is filled with both challenges and opportunities, and your expertise has illuminated the path ahead.
Dr. Smith: Thank you for having me! It’s always a pleasure to discuss these pressing issues.