Donald Trump was able to enjoy an extra toast during his banquet with the King as the US central bank delivered his demand for an interest rate cut.
The 0.25 percentage point reduction to 4-4.25% may have fallen short of the president’s call for a 0.5% cut, but the Federal Reserve has hinted at two more cuts this year.
It was not clear how much influence the president had on the decision but policymakers said they were worried about a slowdown in the jobs market.
Fed chairman Jerome Powell said the economy was not generating the 150,000 jobs a month that had been estimated earlier this year.
“The new numbers suggest the labour market is really cooling off. That tells you it is time to take that into account,” he said.
Wall Street stocks finished mixed in response to the decision.
Despite a brief swing into the red following the Fed meeting, the Dow ended the day 0.6% higher to finish just short of last week’s record high. Meanwhile the S&P 500 fell 0.1% and the Nasdaq slipped 0.3%, with both dropping sharply before paring losses by the closing bell.
“We do not see this decision as being an impediment to future stock market gains, even if it triggers short-term stock market volatility,” said Kathleen Brooks, research director at XTB.
James Bentley, trading director at Financial Markets Online, said: “The Fed’s decision is a near slam dunk for Donald Trump and gave the President plenty to toast with the royal crystal as he dined with King Charles at Windsor Castle.
“While the cut wasn’t the supersize 50bps ‘catch-up’ cut some doves had hoped for, it came with confirmation that this is no ‘one and done’ affair.
“The Fed gave a clear indication that this cut, the first of 2025, could be followed by two more by the end of the year.
“While today’s decision had been fully priced in by the markets, the prospect of such a sustained splurge of monetary stimulus has lit a fire under US equities and taken the steam out of gold prices. The S&P 500 could now be on course for another record high.”
In the UK, the rate of inflation remained at 3.8% last month, well above the Bank of England’s 2% target and will almost certainly mean it will keep interest rates unchanged.
The FTSE 100 index closed up 12.71 points, 0.1%, at 9,208.37.
#Fed #cuts #interest #rates #time #year #Daily #Business