Fed cuts interest rates by a quarter of a point
The Federal Reserve cut interest rates by a quarter of a percentage point for the third time in a row in an effort to lower borrowing costs for consumers.
President Donald Trump said he plans to announce his choice to replace Federal Reserve Chairman Jerome Powell in January, a long-awaited moment for financial institutions that the president has attacked as he pushes to cut interest rates to boost economic activity.
Powell’s term expires in May, but President Trump has been eager to see him step down and has repeatedly criticized the central bank’s leadership.
President Trump met with the Israeli prime minister at the Mar-a-Lago Club in Florida on December 29, and said, “I want to fire him, but he’s getting close,” as his term ends.
The Fed has cut interest rates three times this year, but President Trump said the latest rate cut on Dec. 10 “could be twice that.”
President Trump reacted to the interest rate cut during a roundtable discussion with business leaders, saying, “The Fed chairman is stubborn.” “You know, you’re fighting that…Interest rates are going down, but not by much in his case. What he did was a pretty small number that could probably double, at least double.”
Generally, the Fed lowers interest rates to stimulate a struggling economy and job market. In order to reduce inflation or prevent price increases, interest rates are raised or kept high for a long period of time.
President Trump selected Powell as Fed chair in 2017 during his first term, but since taking office, the president has repeatedly criticized the Fed chair for being “too slow,” threatened to file a lawsuit, and never met with Powell in person while touring the Fed’s building renovations.
The Fed lowered its benchmark federal funds rate by another quarter of a point this month to a range of 3.5% to 3.75% in an effort to stimulate the labor market. But affordability remains a concern for many Americans. Lower borrowing costs could lead to higher spending, putting upward pressure on prices, a difficult balancing act for the Fed.
Contributor: Rachel Barber
