The Federal Reserve has cut interest rates in the US by 25bps, the 2nd month in a row the Fed has slashed rates. Amid the government shutdown that has limited the view of economic data the Fed could go off of, the central bank voted to lower borrowing costs by a quarter of a percentage point.
The new benchmark lending rate between 3.75% and 4% is the lowest in three years. “Uncertainty about the economic outlook remains elevated,” the Fed said in a statement. “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”
Further, Fed Chair Jerome Powell hinted that it’s difficult to forecast any more cuts this year amid the ongoing shutdown, as job data isn’t readily available. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it,” Powell said. “Policy is not on a preset course.”
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Following the interest rate cut, Bitcoin dipped by 2%. On the stock market, major U.S. stock indexes also fell due to the uncertainty of a December rate cut. Fed Chairman Jerome Powell and the US Central Bank have received persistent calls to lower interest rates by those who say the US economy is performing well. The Trump administration has made several threats to the Fed, calling for rate cuts, including for Powell and his Fed Governor Lisa Cook to be fired. The Fed has been in hot water since the start of the year because of the lack of rate cuts, but now appears to be following through on Trump’s requests.