Federal Reserve cuts interest rates

The Federal Reserve cut interest rates by a quarter of a percentage point as policymakers took note of a job market that has “generally eased” while inflation continues to move towards the US central bank’s 2 per cent target.

“Economic activity has continued to expand at a solid pace,” the central bank’s rate-setting Federal Open Market Committee said at the end of a two-day policy meeting in which officials lowered the benchmark overnight interest rate to the 4.50 per cent-4.75 per cent range, as widely expected. The decision was unanimous.

Wall Street barely budged after the announcement, all eyes will now turn to Jerome Powell, who speaks at 6.30am AEDT. The S&P 500 was up 0.6 per cent in afternoon trading, though momentum slowed sharply from its surge the day before following Donald Trump’s presidential victory. The Dow Jones was flat and the Nasdaq composite was 1.3 per cent higher.

But where the Fed’s previous policy statement noted slowing monthly job gains, the new one referred to the labour market more broadly.

Even while the unemployment rate remains low, “labour market conditions have generally eased,” the statement said.

Risks to the job market and inflation were “roughly in balance,” the Fed said, repeating language from the statement released after its September meeting.

The new statement also slightly altered the reference to inflation, saying that price pressures had “made progress” towards the Fed’s objective, rather than the prior language that it had “made further progress.” The personal consumption expenditures price index excluding food and energy items, a key gauge of inflation, has changed little in the last three months, running at a roughly 2.6 per cent annual rate as of September.

The Fed statement will be interpreted in light of Republican President-elect Donald Trump’s return to power in January.