Egypt Daily News – The Federal Reserve lowered interest rates for the third time in a row, in a move consistent with expectations, continuing to ease its monetary policy, and aiming to avoid economic growth being affected by the boldest monetary tightening cycle in decades.
In its last meeting of the current year, and ahead of the inauguration of Donald Trump as President of the United States on January 20, the Federal Open Market Committee voted, today, Wednesday, in favor of reducing interest rates by 25 basis points to a range of 4.25% and 4.5%, as part of maintaining the continued strength of the economy. The US government gave inflation more time to fall towards the Fed’s target of 2% in a sustainable manner.
It should be noted that futures contracts prior to the issuance of the decision indicated widespread expectations that the US Central Bank would reduce the main interest rate by a quarter of a percentage point today.
After the Federal Open Market Committee’s decision, the Federal Reserve will have reduced interest rates by a total of one full percentage point since the start of its monetary policy easing process last September.
The US economy has proven to be more robust than officials expected a few months ago, with more recent data indicating that US inflation has slowed less than expected and that the labor market has not weakened as much as feared.
The US inflation report in November highlighted that inflation has declined in recent months at a slower-than-expected pace. The headline CPI recorded its first consecutive year-on-year acceleration since March, while the core rate has remained stable at 3.3% for three months, well above the figure consistent with the Fed’s 2% target for the PCE price index, until now.
On the employment front, the US labor market regained its strength last month, recovering from the effects of storms and strikes in October. This supports the Federal Reserve’s belief that the labor market is still strong, but is no longer fueling inflation significantly, which encourages it to seek to give the economy a boost and ensure continued employment.
