U.S. Federal Reserve officials are poised Thursday to reduce their key interest rate for a second straight time, responding to a steady slowdown of the inflation pressures that exasperated many Americans and contributed to Donald Trump’s presidential election victory.
Christopher Rugaber, The Associated PressWASHINGTON —
The economy is also clouding the picture by flashing conflicting signals, with growth solid but hiring weakening. Even so, consumer spending has been healthy, fueling concerns that there is no need for the Fed to reduce borrowing costs and that doing so might overstimulate the economy and even re-accelerate inflation.
Broader interest rates have risen because investors are anticipating higher inflation, larger federal budget deficits, and faster economic growth under a President-elect Trump. In what Wall Street has called the “Trump trade,” stock prices also soared Wednesday and the value of bitcoin and the dollar surged. Trump had talked up cryptocurrencies during his campaign, and the dollar would likely benefit from higher rates and from the across-the-board increase in tariffs that Trump has proposed.
Such an increase would likely upend the future rate cuts the Fed had signaled in September. At that meeting, when the policymakers cut their key rate by an outsize half-point to about 4.9%, the officials said they envisioned two quarter-point rate reductions later in the year — one on Thursday and one in December — and then four additional rate cuts in 2025.
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