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Key Takeaways
- The Federal Reserve cut its benchmark interest rate Thursday by 0.25 percentage points to a range of 4.5% to 4.75%, its lowest since February 2023.
- The Fed is cutting its influential fed funds rate to push down borrowing costs on all kinds of loans and boost the economy to prevent unemployment from rising severely.
- Despite September’s rate cut, mortgage rates have risen in recent weeks because of investor concerns about a resurgence of inflation under president-elect Donald Trump’s economic policies.
The Federal Reserve stayed the course on its campaign of rate cuts Thursday, trimming its benchmark interest rate by a quarter-point in a widely expected move.
In a unanimous vote, the Fed’s policy committee lowered its benchmark interest by 0.25 percentage points to 4.5% to 4.75%, its lowest level since March 2023.
The Fed cut rates for the second time in as many meetings as a part of an effort to boost the economy and prevent a recent slowdown in the job market from turning into a severe rise in unemployment. Until September, the central bank had held the rate at a two-decade high to subdue inflation, but consumer price increases have slowed nearly to the Fed’s goal of a 2% annual rate. The Fed is attempting to fulfill its mandate from Congress to keep both inflation and unemployment low.
“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance,” the committee said, repeating language from its September statement.
Fed officials left it open-ended how fast they would cut at future meetings, reiterating that their future decisions would be guided by economic data. The Federal Open Market Committee meets again in December, and Fed officials have projected another quarter-point cut at that meeting, though not committed to it.
A lower Fed funds rate puts downward pressure on borrowing costs for all kinds of loans, including credit cards, auto loans, and mortgages. However, financial markets also play a role in some of those rates, so borrowers haven’t necessarily immediately benefited from the Fed’s most recent cuts.
Interest rates for mortgages, which are tied to 10-year Treasury and investor concerns about inflation, have risen due to concerns that President-elect Trump’s economic policies could stoke faster price increases for consumer goods.