The US Federal Reserve has slashed interest rates by 0.25 percentage points, bringing the cost of borrowing across the Atlantic to a new range of 3.50 per cent to 3.75 per cent.
This represents the third cut in the US base rate this year, but members of the Federal Open Market Committee (FOMC) warned inflation will likely remain above the central bank’s two per cent target in 2026.
Policymakers have sought to keep the American labour market intact, despite concerns from several key Fed officials who believe the financial institution should be prioritising the cost of living.
Notably, today’s decision appeared to signal division among FOMC policymakers with three members voting “no”, which has not happened at a meeting since September 2019.
The Fed has cut interest rates but warned inflation will remain above 2%
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The vote to cut interest rates won nine-to-three with Governor Stephen Miran being in favour of a larger 0.5 percent rate reduction while regional presidents voted for the base rate to remain at its current level.
Hawish Fed policymakers are generally focused on addressing inflation with high interest rates being used as a tool to bring the consumer price index (CPI) rate down.
In comparison, dovish members of the FOMC are usually supportive of the wider labour market and in favour of lower interest rates to achieve this long-term.
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