The Federal Reserve cuts interest rates, days after Trump’s election

The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, setting the latest path for borrowing costs, just two days after President-elect Donald Trump’s victory.

The move comes two months after the Fed cut its key interest rate by half a percentage point, scaling back its years-long battle against inflation and providing relief to borrowers saddled with high costs.

At a news conference in Washington, DC on Thursday, Fed Chairman Jerome Powell expressed optimism about the prospects of a “soft landing” in which the US would avert recession and inflation would return to normal.

“We remain confident that with an appropriate reset of our policy stance, the strength of the economy and labor market can be maintained and inflation will fall sustainably to 2%,” Powell said.

The path of inflation could shift in the coming months. Trump’s proposals for higher tariffs and mass deportations of undocumented immigrants are widely expected to drive up consumer prices, experts previously told ABC News.

Asked about the Fed’s possible response to Trump’s policies, Powell said the central bank would ultimately make its decisions based on the potential impact of any policy changes on the economy.

“In the short term, the election will have no impact on our policy decisions,” Powell said Thursday. “We do not know when and to what extent policy changes will occur. So we don’t know what impact this will have on the economy.”

“We don’t guess, we don’t speculate and we don’t assume,” Powell added.

The Federal Open Market Committee (FOMC), a policy-making body of the Fed, has forecast further interest rate cuts.

According to FOMC forecasts, interest rates will decline by another quarter of a percentage point from their current levels of between 4.5% and 4.75% by the end of 2024. The forecasts further suggest that interest rates will fall by another percentage point over the course of 2025.

In recent months, the U.S. has moved closer to a “soft landing” in which inflation returns to normal and the economy averts recession.

Government data released last week showed robust economic growth over the past three months, while inflation continued to cool.

U.S. hiring fell in October, but the fallout from hurricanes and labor strikes likely led to an undercount of workers in the country, data from the U.S. Bureau of Labor Statistics showed Friday.

Since 2021, the Fed has been trying to curb inflation by raising interest rates. Even after the Federal Reserve cut its key interest rate in September, it is still at historically high levels.

Inflation has cooled dramatically from a peak of about 9% in 2022 and is now close to the Federal Reserve’s target rate of 2%.

When Powell was previously asked about the 2024 election at a press conference in Washington, D.C. in December, he said, “We don’t think about politics.”

Trump’s election appears to have given the stock market a boost. The U.S. stock market soared at the open on Wednesday, just hours after Trump declared victory.

The Dow Jones Industrial Average rose more than 1,300 points, putting the index up nearly 3%. The S&P 500 and the tech-heavy Nasdaq each rose more than 2%.

Shares of Tesla, the electric vehicle company owned by Trump ally Elon Musk, rose about 14.5% in early trading on Wednesday.