Fed Unanimously Cuts Benchmark Rate by 25 Basis Points

Forex - The Fed approved a quarter-point interest rate cut, taking another step to prevent the significant interest rate hikes of the past 2.5 years from weakening the labor market while inflation declines. The decision, made in the same week as Donald Trump's re-election, came after the first half-point cut in September and will bring the benchmark federal funds rate into a range of 4.5% to 4.75%. All 12 voting members of the Fed supported the interest rate cut.

Officials stated that these moves were necessary because they are more confident that inflation will return to the central bank's target and believe that rates are still high enough to dampen economic activity despite recent cuts.

In a statement from the Fed, it was noted, “The Committee has determined that the risks to achieving the employment and inflation targets are roughly balanced.” In its statement following a two-day policy meeting, the Federal Open Market Committee said, “Economic activity continues to expand at a solid pace.”

However, while the Fed's previous policy statement highlighted that monthly job gains had slowed, the new statement referred more broadly to the labor market. It noted, “Although the unemployment rate remains low, labor market conditions have generally eased.”