The US Federal Reserve cut interest rates for the first time this year on Wednesday (September 17).
The Federal Open Market Committee lowered the benchmark federal funds target range to 4 per cent to 4.25 per cent.
It was the first cut since December and took rates to their lowest since 2022.
Lindsay James, investment strategist at Quilter said the Fed would have found itself “backed into a corner” amid increased political pressure.
She said: “While the Fed has finally given in and cut rates for the first time since December, taking rates to the lowest level since late 2022, Trump will not yet be satisfied.
“He has repeatedly called for far deeper cuts, and that pressure is unlikely to let up. He has made no secret of his want for a more compliant central bank, and today’s cut may just add fuel to that fire.”
David Rees, head of global economics at Schroders, expects the Fed will deliver another two 0.25 per cent cuts by the end of 2025, but thought anything below 3 per cent would be “too aggressive”.
He added: “The Fed’s decision to press ahead with interest rate cuts at a time when the solid economy is close to full employment raises the risk of higher inflation becoming ingrained.”
Isaac Stell, investment manager at Wealth Club said the justification behind the cut focuses on employment rather than inflation.
He said: “The labour market has been deteriorating more rapidly than expected, with the unemployment rate recently reaching its highest level since October 2021.
“Despite inflation remaining comfortably above the Fed’s target, signs of strain in the jobs market were compelling enough to prompt action.
“However, the decision is unlikely to satisfy the President who made it publicly known he expected a ‘big cut’, not the 0.25 oer cent the Fed has opted for today.
“Unfortunately, the timing and circumstances of today’s move make it appear more like a concession rather than a strategic policy shift, potentially fuelling concerns about the Fed’s independence.”
tara.o’connor@ft.com
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