WASHINGTON: The US Federal Reserve cut interest rates by a quarter point on Wednesday and signalled a slower pace of cuts ahead, as uncertainty grows over inflation and President-elect Donald Trump’s economic plans.

Policymakers voted 11-to-1 to lower the US central bank’s key lending rate to between 4.25 per cent and 4.50pc, the Fed announced in a statement.

The sole holdout, who supported keeping rates where they were, was Cleveland Fed President Beth Hammack. In updated economic forecasts published alongside the decision, members of the Fed’s rate-setting committee penciled in just two quarter-point rate cuts in 2025, down from an earlier prediction of four, and hiked their inflation outlook for next year, from 2.1 percent to 2.5 percent.

The Fed has made progress tackling inflation through interest rate hikes in the last two years, and recently began paring back rates to boost demand in the economy and support the labor market.

But in the last couple of months, the Fed’s favoured inflation measure has ticked higher, moving away from the bank’s long-term target of two per cent, and raising concerns that the US central bank’s battle is not over.

This is the final planned interest rate decision before outgoing Democratic President Joe Biden makes way for Republican Donald Trump, whose economic proposals include tariff hikes and the mass deportation of millions of undocumented workers.

Published in Dawn, December 19th, 2024