The Federal Reserve has cut interest rates by a quarter of a percentage point, bringing the new range to 4.25 to 4.50 percent. This decision follows previous reductions in September and November, with a brief increase in December aimed at addressing a decline in inflation.
Federal Reserve Chair Jerome Powell has emphasized the persistent risks posed by inflation and the growing uncertainty surrounding the future trajectory of the U.S. economy. Recent data indicates that inflation has edged up to 2.7%, a slight increase from 2.6% in October. The core inflation rate, which excludes the more volatile categories of energy and food, has remained stable at 3.3%. The stability in core inflation suggests that while overall price pressures may be easing, underlying inflationary trends could still pose challenges for policymakers.
The labor market continues to show resilience, with the creation of 227,000 new non-farm jobs last month, surpassing the anticipated figure of 200,000. However, the unemployment rate rose by 0.1 percentage points to 4.2%.
The Fed's decision to lower interest rates has elicited mixed reactions from market participants, who are grappling with the implications of a slower pace of rate cuts moving forward. The potential impact of tariffs introduced by the Trump administration adds another layer of complexity, as these measures could lead to increased costs for consumers and businesses alike. The interplay between inflation, employment, and economic growth will be critical in shaping the Fed's approach in the coming months.