The U.S. Federal Reserve lowered interest rates on Thursday night, providing a boost for incoming President Donald Trump. The central bank voted to reduce rates by a quarter of a percentage point, just two days after economic concerns under the Democrats helped propel Trump back into office.
In its statement, the Fed noted that “economic activity has continued to expand at a solid pace” and that “inflation has made progress toward the committee’s 2% objective but remains somewhat elevated.” However, it cautioned that “the economic outlook is uncertain.”
The U.S. federal funds rate now stands at 4.5% to 4.75%, down from the previous range of 4.75% to 5%.
This rate cut supports the economy as Donald Trump prepares to return to the White House, promising a stronger economic future under his leadership. His re-election was bolstered by a cost-of-living crisis and high interest rates under Joe Biden, which followed the Covid pandemic. Voters recalled the prosperity experienced during Trump’s first term.
The Fed’s rate reduction comes despite the potential for higher inflation due to Trump’s policies, which include tariffs and other measures that economists suggest could push prices upward alongside economic growth.
Ahead of Thursday evening’s decision, traders had already adjusted their expectations for the number of rate cuts the Fed might deliver next year in light of Trump’s re-election. These anticipated cuts have been a significant factor in the S&P 500 reaching record highs throughout the year.
Earlier on Thursday, the Bank of England also cut interest rates by a quarter point, marking only its second reduction since 2020. However, the bank signaled that any further cuts would likely be gradual, given its forecast for higher inflation following the recent government budget.
Additionally, CNN reported on Thursday that a senior adviser to Trump suggested the President-elect may allow Jerome Powell to complete his term as Federal Reserve chair, which is set to end in May 2026.
