Washington, Sep. 17 (EFE). – The United States Federal Reserve announced on Wednesday a rate cut by a quarter of a point to a range of 4% to 4.25%, and signaled further cuts in late 2025.<\/p>
A majority of members of the Federal Open Market Committee believe that by the end of the year, the appropriate range should be 3.5% to 3.75%, 50 basis points below the current level, according to the Fed’s latest summary of projections. <\/p>
This shows a majority consensus aimed at approving two more cuts at the FOMC meetings scheduled for October and December.<\/p>
However, the Fed’s chairman, Jerome Powell, recalled at a press conference that \u201cas is always the case, these individual forecasts are subject to uncertainty, and they are not a committee plan or decision.\u201d <\/p>
\u201cPolicy is not on a preset course,\u201d he added. <\/p>
In the statement explaining the first rate cut since United States President Donald Trump returned to the White House, the Fed stressed that inflation \u201cremains somewhat elevated\u201d and that \u201cthe downside risks to employment appear to have risen.\u201d<\/p>
\u201cRecent indicators suggest that growth of economic activity has moderated. GDP rose at a pace of around one and a half percent in the first half of the year, down from 2.5 percent last year. The moderation in growth largely reflects a slowdown in consumer spending,\u201d the statement said.<\/p>
Inflation forecast unchanged<\/p>
The Fed kept its inflation projection for this year unchanged at 3%, above its 2% target, at a time when prices in the US have begun to absorb the effects of the tariffs imposed in Trump’s trade war. <\/p>
\u201cHigher tariffs have begun to push up prices in some categories of goods, but their overall effects on economic activity and inflation remain to be seen,\u201d said the Fed chairman.<\/p>
Powell, however, assured that there \u201cis also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.\u201d<\/p>
The Fed now expects gross domestic product to grow by 1.6% in 2025, up from the 1.4% projected in the previous report.<\/p>
In any case, this is well below the 2.5% recorded in 2024, as Powell pointed out, noting that the decline in consumption is a key factor in the current slowdown in the world’s largest economy.<\/p>
Powell also wanted to emphasize the key role that the decline in immigration caused by new border policies in the US has played in the slowdown in hiring.<\/p>
\u201cA good part of the slowing likely reflects a decline in the growth of the labor force, due to lower immigration and lower labor force participation,\u201d said Powell.<\/p>
\u201cOverall, the marked slowing in both the supply of and demand for workers is unusual. In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen,\u201d he added.<\/p>
Patient approach<\/p>
The Fed chairman also defended the decision not to opt for a half-point cut, as proposed by Stephen Miran, the new member of the Board of Governors appointed by Trump, who, since coming to power, has been pressuring Powell to accelerate rate cuts.<\/p>
\u201cWe’ve done very large rate hikes and very large rate cuts in the last five years, and you tend to do those at a time when you feel that policy is out of place and needs to move quickly to a new place,\u201d Powell said.\u200b<\/p>
When asked about Miran’s arrival and the Trump administration’s attempts to undermine the institution’s independence, Powell simply noted that the FOMC \u201cremains united in pursuing our dual mandate goals.\u201d EFE<\/p>
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