US: Interest rates are lowered by 0.25% by the Federal Reserve

US: In an effort to balance the danger of inflation with a labor market that was beginning to cool, the US Federal Reserve lowered interest rates by 0.25 percent, bringing them to the range of 3.5 to 3.75 percent.

Following the announcement of the rate decrease on Wednesday (local time), Fed Chairman Jerome Powell said, “We are trying to keep inflation under control, but also support the labour market and strong wages, so that people are earning enough money, and feeling economically healthy again.”

All things considered, he said, “We have an extraordinary economy.”

Wall Street responded to that optimism by pushing the Dow Jones index up by about 500 points, or 1.05 percent, at the conclusion of business.

The overnight rate, which banks and other lending institutions charge each other for short-term lending, is determined by the Fed and affects many aspects of the economy, including consumer credit card and mortgage rates as well as interest rates for commercial loans.

It affects certain rates overseas as well.

Following US President Donald Trump’s return to office in January, this was the third rate decrease; the first two occurred in September and October.

The 0.25 percent decrease did not sit well with Trump, who has been pressuring Powell to make significant rate cuts.

After meeting with business executives, he said that it may have been twice as much.

“You can have tremendous growth without inflation,” he remarked, criticizing Powell’s warning about inflation. Growth causes everything to rise, but that isn’t inflation.

Powell was nominated by Trump in 2018 and will leave office in May of the following year.

Treasury Secretary Scott Bessent’s short list of potential successors has begun to be considered by Trump, who announced that he will meet Kevin Warsh, a former member of the Federal Reserve Board of Governors, on Wednesday.

He has often criticized Powell and expressed his desire to dismiss him.

It could rely on the Supreme Court’s ruling about the president’s authority to remove leaders of independent organizations.

The justices were doubtful during a recent hearing about whether the Fed chair would have such powers.

Powell attributed part of the inflation on Trump’s tariffs.

When tariffs are removed, inflation is in the low twos, or about two percent. “The majority of the inflation overshoot is actually being caused by tariffs,” he said.

The current rate of inflation is 3%.

He said that “gradual cooling in the labour market has continued” and “unemployment is now up three-tenths from June through September” in reference to the employment environment that affected his choice.

In September, the unemployment rate was 4.4%.