
Despite a precipitous drop from the 9.1% inflation rate from June 2022, inflation – and Americans’ frustrations over it — has been a hot topic through the 2024 election season.
But Federal Reserve officials looked past political arguments and the frustration and delivered the Fed’s second straight rate cut Thursday.
The Federal Reserve cut its key interest rate by a quarter-point in response to the steady decline in the once-high inflation. The rate cut follows a larger half-point reduction in September, and it reflects the Fed’s renewed focus on supporting the job market as well as fighting inflation, which now barely exceeds the central bank’s 2% target, the Assciated Press reported.
Thursday’s move reduces the Fed’s benchmark rate to about 4.6%, down from a four-decade high of 5.3% before September’s meeting. The Fed had kept its rate that high for more than a year as it continued to battle the stubbornly high inflation rate.
Annual inflation has since fallen from a 9.1% peak in mid-2022 to a 3 1/2-year low of 2.4% in September.
Fed Chair Jerome Powell said the election results will have “no effects” on Fed decisions about interest rates.
In a statement after its latest meeting ended, the Fed said the “unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”
The Fed made its first rate cut in more than four years following the board’s September meeting. After that meeting, the Fed’s policymakers had projected that they would make further quarter-point cuts in November and December and four more next year.
Powell said the Fed intends, over time, to keep reducing its key rate toward what the central bank calls “neutral” – a level that neither restricts nor stimulates growth, the AP reported. He and other officials have acknowledged that they don’t know exactly where the neutral rate is.
“We’re on a path to a more neutral stance,” the Fed chair said. “That has not changed at all. We’re just going to have to see where the data is.”