The U.S. Federal Reserve lowered its benchmark interest rate by 25 basis points on Wednesday (Thursday, Manila time), bringing the federal funds target range to 4.00–4.25 percent. The decision comes amid signs of slowing job gains, persistent inflation, and moderating economic growth.
Fed Chair Jerome Powell framed the move as a response to rising economic uncertainties and part of the central bank’s broader effort to meet its dual mandate of maximum employment and stable 2 percent inflation.
“You can think of this, in a way, as a risk management cut,” Powell said, highlighting a shift in risk dynamics as the labor market cools.
While inflation remains above target, Powell acknowledged growing concern over a potential slowdown in hiring, partly linked to tighter immigration policies under the Trump administration. He emphasized that the Federal Open Market Committee (FOMC) would remain data-dependent in its future policy decisions.
“In considering additional adjustments, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” he noted.
Despite the rate cut, the Fed reaffirmed its commitment to quantitative tightening, continuing to shrink its balance sheet by reducing holdings of Treasury securities and mortgage-backed assets.
The policy shift signals a more accommodative stance as the Fed navigates a complex environment shaped by geopolitical tensions, weakening global demand, and uneven domestic indicators.
The move also increases the likelihood of parallel adjustments by other central banks, including the Bangko Sentral ng Pilipinas, which recently trimmed rates amid similar inflationary and demand-side pressures.
Ultimately, the Fed’s latest action underscores its cautious balancing act—managing inflation expectations while guarding against an economic slowdown that could threaten the post-pandemic recovery.
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