Input Stories

The Federal Reserve cut interest rates Thursday for the second consecutive time (CNBC).

What’s going on: “In a follow-up to September’s big half percentage point reduction, the Federal Open Market Committee lowered its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points, to a target range of 4.50%-4.75%. The rate sets what banks charge each other for overnight lending but often influences consumer debt instruments such as mortgages, credit cards and auto loans.”

• The move was widely expected and the decision unanimous among Fed governors.  

Why they did it: In its post-meeting statement, the central bank “slightly downgraded the labor market, saying ‘conditions have generally eased, and the unemployment rate has moved up but remains low.’ The committee again said the economy ‘has continued to expand at a solid pace.’”

• The Fed’s preferred inflation gauge, the PCE Index, showed September inflation slowing to a pace of 2.1% on an annual basis, close to the central bank’s goal of 2%.

Why it’s important: The Fed’s statement shows “a few tweaks in how [it] views the economy. Among them was an altered view in how it assesses the effort to bring down inflation while supporting the labor market.”

State of the economy: U.S. gross domestic product grew at a pace of 2.8% last quarter and “the labor market has held up well,” but “inflation remains a stifling problem for U.S. households.”

• Economists predict President-elect Donald Trump’s “policies [will] pose challenges for inflation … In his first term, however, inflation held low while economic growth, outside of the initial phase of the Covid pandemic, held strong.”

What’s next: “The FOMC indicated in September that members expected a half percentage point more in cuts by the end of this year and then another full percentage point in 2025.”