Did the US Federal Reserve Just Cut Interest Rates by 0.25%?
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Synopsis
The US Federal Reserve has made a significant move by cutting interest rates by 0.25%, a decision that reflects the current economic climate. Chairman Jerome Powell emphasizes balancing inflation control and supporting the labour market, which has shown signs of cooling. Wall Street responded positively, indicating investor optimism amidst the changes.
Key Takeaways
- The US Federal Reserve has reduced interest rates by 0.25%.
- The new rate is set between 3.5 to 3.75%.
- This decision reflects the need to balance inflation and a cooling labour market.
- Wall Street responded positively, with a significant rise in the Dow Jones index.
- Fed Chairman Jerome Powell emphasizes the importance of economic stability.
New York, Dec 11 (NationPress) The US Federal Reserve has decided to reduce the interest rate by 0.25%, adjusting it to the 3.5 to 3.75% range. This move aims to strike a balance between inflation risks and a cooling labour market.
Fed Chairman Jerome Powell remarked following the announcement on Wednesday (local time), "Our goal is to maintain inflation control while also bolstering the labour market and ensuring strong wages, allowing individuals to earn adequately and feel economically stable again."
He added, "We are witnessing an extraordinary economy."
In response to this announcement, Wall Street reacted positively, with the Dow Jones index soaring nearly 500 points, or 1.05% by the close of trading.
The interest rate set by the Federal Reserve is referred to as the overnight rate, which banks and lending institutions charge for short-term loans among themselves. This rate significantly impacts the economy, influencing both business loans and consumer interest rates for mortgages and credit cards.
Furthermore, it also has ramifications for certain international rates.
This marks the third interest rate cut since US President Donald Trump took office in January, with reductions occurring consecutively in September, October, and now.
Trump, who has been advocating for aggressive rate cuts, expressed dissatisfaction with the 0.25% reduction, suggesting it could have been higher.
He commented after a meeting with business leaders, "You can achieve significant growth without causing inflation. Everything rises with growth, but that's not inflation."
Powell, who was appointed by Trump in 2018, is set to conclude his term in May of next year.
Trump has begun to evaluate candidates for Powell's successor from a shortlist provided by Treasury Secretary Scott Bessent and has planned to interview Kevin Warsh, a former member of the Federal Reserve Board of Governors, on Wednesday.
Trump has frequently criticized Powell and has indicated a desire to dismiss him.
The outcome may hinge on a Supreme Court decision regarding the president's authority to terminate heads of independent agencies.
At a recent hearing, justices appeared uncertain about whether such powers would extend to the Fed chair.
Powell attributed some inflationary pressures to Trump's tariffs, stating, "If we move beyond tariffs, inflation would be in the low 2% range. Tariffs are primarily responsible for the inflation overshoot."
Currently, inflation stands at 3%.
Regarding the employment landscape that influenced his decision, Powell noted, "A gradual cooling in the labour market continues," and highlighted that "unemployment has risen by three-tenths from June through September."
The unemployment rate was reported at 4.4% in September.
(Arulk Louis can be contacted at arul.l@ians.in)
Point of View
The recent interest rate cut by the US Federal Reserve speaks volumes about the balancing act faced by economic leaders. While efforts to control inflation are crucial, ensuring job stability and wage growth remains paramount. This decision reflects an understanding of the current economic challenges and the need for strategic adjustments.
NationPress
12/12/2025
Frequently Asked Questions
What is the new interest rate set by the Federal Reserve?
The Federal Reserve has cut the interest rate to a range of 3.5 to 3.75%.
Why did the Federal Reserve decide to cut interest rates?
The cut aims to balance inflation risks with a cooling labour market.
How did Wall Street react to the rate cut?
Wall Street saw a positive response, with the Dow Jones index rising nearly 500 points.
What is the significance of the overnight rate?
The overnight rate influences short-term lending between banks and affects consumer loan rates.
What are President Trump's views on this rate cut?
President Trump expressed dissatisfaction with the 0.25% cut, suggesting it could have been larger.
