Has the US Federal Reserve Cut Interest Rates to Combat Inflation?
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Synopsis
In a pivotal move, the US Federal Reserve has reduced interest rates by a quarter percent, aiming to mitigate inflation and counter a slowing economy. This decision comes amid rising tensions with former President Trump and highlights the delicate balance the Fed seeks to maintain in the current economic climate.
Key Takeaways
- Federal Reserve cuts interest rates by a quarter percent.
- Rate adjustment aims to balance inflation control and economic growth.
- Job growth has significantly slowed in recent months.
- Former President Trump has been vocal in criticizing the Fed.
- Powell emphasizes the Fed's independence amidst political pressures.
New York, Sept 18 (NationPress) Following a contentious exchange with US President Donald Trump, the Federal Reserve has reduced its interest rate by a quarter percent in an effort to manage inflation while also addressing a potential economic downturn.
The announcement, which adjusts the benchmark interest rate to the 4 percent to 4.25 percent range, came on Wednesday (local time), with indications that additional cuts may follow later this year.
Despite Chairman Jerome Powell maintaining the rate since December out of concern for a potential inflation spike, diminishing job growth ultimately led to this decision.
Powell had previously resisted Trump's consistent calls for a rate cut and threats of dismissal.
At a news conference, Powell remarked, "Typically, a weak labor market correlates with low inflation. However, we currently face dual risks of reduced growth and rising inflation. There is no entirely safe path forward."
"This is a challenging scenario," he added.
While the unemployment rate remains around 4.3 percent, job growth has significantly reduced, dropping from a monthly increase of 139,000 in May to just 22,000 last month.
Inflation surged to 2.9 percent in August, reflecting a 0.2 percent rise from July.
Powell noted that slowing job growth might be linked to immigration restrictions.
"There's minimal growth in the available workforce, coupled with a sharp decline in demand for jobs," he stated.
He also expressed a revised outlook on tariffs' impact on inflation, predicting it would be less significant and more transient than earlier anticipated.
Trump has politicized the Federal Reserve, accusing Powell of intentionally withholding rate cuts, unlike the three reductions granted to former President Joe Biden last year.
At the time of the announcement, Trump was in Britain.
Having appointed Powell during his first term, Trump had a fallout over Powell's reluctance to lower rates and considered removing him, despite questions about his authority to do so.
Nonetheless, he refrained from following through, continuing to criticize Powell.
Trump labeled him as "Too Late Powell" and accused him of hindering economic growth by maintaining high interest rates during his presidency.
In an attempt to influence the Fed's composition, Trump attempted to dismiss one of the Fed governors, Biden nominee Lisa Cook, based on alleged irregularities in a mortgage application, which she has denied.
A federal court intervened to block her removal.
Trump appointed Stephen Miran, former chair of his Council of Economic Advisers, as a governor, who was sworn in just before the Fed meeting and was the sole dissenter, arguing for a 0.5 percent cut.
Powell reaffirmed the Fed's independence amidst Trump's criticisms, stating, "We do not frame these discussions in terms of political outcomes."
"We're taking a longer view. Our goal is to serve the American populace to the best of our ability," he concluded.
Point of View
It's imperative to recognize the complexity of the Federal Reserve's decision-making process. The recent rate cut reflects a careful balancing act to address both inflation concerns and potential economic stagnation. The Fed remains committed to its independent role in shaping economic policy, despite external pressures, ensuring that the interests of the American people take precedence.
NationPress
21/09/2025
Frequently Asked Questions
What prompted the Federal Reserve to cut interest rates?
The Federal Reserve decided to cut interest rates to manage rising inflation and address concerns over slowing job growth, despite previous resistance to rate cuts.
How much did the Federal Reserve cut the interest rate by?
The Federal Reserve cut the interest rate by a quarter percent, adjusting the benchmark rate to the 4 percent to 4.25 percent range.
What are the potential consequences of this rate cut?
The rate cut aims to stimulate economic growth and prevent a slowdown, but it also raises concerns about inflation and the overall health of the job market.
How has former President Trump reacted to the Federal Reserve's actions?
Former President Trump has criticized Chairman Powell and accused the Fed of deliberately withholding rate cuts, resulting in tensions between the two.
What does Powell say about the current economic situation?
Chairman Powell acknowledges the dual risks of weaker growth and rising inflation, indicating a challenging economic landscape.
