UPDATE: Fed trims interest rates by quarter-point

The Federal Reserve lowered interest rates Thursday by a quarter of a percentage point as inflation continues to cool, but a cloudy economic outlook after Donald Trump was elected again could make the pace of future cuts uncertain.

The unanimous decision to cut rates for the second consecutive Fed meeting signals that officials are paying more attention to warnings of a softening job market. In September, the Fed reduced its benchmark interest rate for the first time in more than four years by a larger-than-usual half-percentage point.

Fed Chair Jerome H. Powell said in a news conference after the meeting that inflation has “eased significantly over the past two years” and that he was confident it would continue to do so with an “appropriate recalibration of our policy stance.”

Thursday’s rate cut was expected. Stocks and Treasury yields held steady after the announcement.

Recent data have shown signs of economic strength, with promising growth, consumer spending and unemployment figures. But there are also warning signs: The economy picked up just 12,000 jobs in October, the slowest pace in nearly four years, as a labor market cool down was exacerbated by major hurricanes and labor strikes.

The economy continues to grow at a solid pace, the Fed said Thursday, although the labor market has cooled and unemployment has worsened slightly since earlier in the year. Inflation is dropping but remains somewhat elevated. Powell refrained from offering guidance about what to expect with future rate cuts.

“We don’t know the right pace, and we don’t know exactly where the destination is,” Powell said. “The point is to find … the right pace and the right destination as we go.”

The Fed’s benchmark rate now sits between 4.50 and 4.75 percent. Interest rate cuts trickle through the financial sector to make an array of consumer and business loans cheaper.

A day after Trump clinched the presidency, Powell was pressed during the news conference about whether the Fed’s pace of rate cuts or economic outlook would change, given Trump’s campaign promises.

Trump’s vows to impose tariffs on U.S. imports, deport undocumented immigrants and renew expiring tax cuts could put upward pressure on inflation depending on how they are implemented. They could also expand federal deficits.

But Powell dismissed questions about a Trump presidency affecting the Fed, saying that “in the near term, the election will have no effects on our policy decisions.”

When asked whether the Fed is concerned about deficits potentially going up, he said the central bank doesn’t comment on fiscal policy. But if there was a rewrite of the tax code, it would revise its economic models, he added.

“That’s a process that takes a lot of time and that we go through all the time with every administration constantly,” Powell said. “This will be no different.”

Ahead of the meeting, analysts said Trump’s big win might make the Fed reluctant to continue cutting rates at a rapid clip. “Various policy uncertainties may lead the Fed to move more slowly than it otherwise would,” JPMorgan Chase & Co.’s Michael Feroli said in a research note Wednesday.

This week’s Fed meeting lacks the drama of September’s, when the central bank was divided on how much to cut and one governor issued a rare dissent.

Fed officials signaled ahead of the election that they see rates continuing to decline gradually. Their goal is to achieve a “neutral rate” that doesn’t constrain or spur economic growth. But it isn’t clear precisely what that rate is, and it can’t be observed. In his remarks Thursday, Powell said the Fed isn’t in any rush to get to a neutral rate.

Analysts and investors in the futures market believe that yet another quarter-percentage-point cut is likely at the Fed’s final 2024 meeting in December, although the pace of additional cuts next year is uncertain.

Powell on Thursday also shut down questions about whether he would prematurely end his term running the central bank. He said that any attempted firing or demotion by the president – of himself or other Fed officials – was “not permitted under the law” and that he would not leave before the end of his term in May 2026 if Trump asked him to.

The issue has been front and center among Fed watchers because Trump repeatedly lashed out at Powell during his first term for not doing enough to stimulate the economy – and even asked his own advisers if he could fire his own Fed chief. Now, with Trump headed to another four years in the White House, some of his advisers have suggested that Powell should resign.

In the lead-up to the election, Trump said he wants the White House to have more say in the operations of the Fed, particularly regarding its decisions on monetary policy. Speaking to Bloomberg News, Trump said that as president, he ought to have a “right to say I think he should go up or down a little bit” on interest rates. He added: “I don’t think I should be allowed to order it.”