The US follows the Bank of England and cuts interest rates despite Trump’s inflation fears

The US Federal Reserve last night went ahead with a quarter of a percentage point cut in interest rates, despite fears that Donald Trump’s presidency could drive up inflation.

Fed chief Jerome Powell brushed off questions about the impact of the president-elect’s plans, saying, “We don’t guess, we don’t speculate, and we don’t assume.”

And Powell also played down fears that Trump might try to force him out. When asked if he would resign if Trump asked him to, he replied: “No.”

The move came hours after the Bank of England also cut interest rates by a quarter of a point. It was announced a day after Trump secured a decisive election victory over Kamala Harris, which has boosted stock markets but raised fears that inflation could start to rise again.

The president-elect’s threat to impose 10 percent tariffs on imports from around the world and a 60 percent tariff on Chinese goods would put renewed price pressure.

That has prompted financial markets to lower expectations about how quickly the Fed will cut rates.

Last night’s rate cut follows a massive half-point cut – the first in four years – in September. Interest rates had been raised sharply by central banks around the world in their battle to reduce inflation.

Now that inflation is coming down, they are starting to lower it. In a statement announcing the move last night, the Fed said inflation had fallen closer to the 2 percent target but “remains somewhat elevated.”

Trump’s election has raised fears not only of rate increases, but also that Trump could meddle in the Fed’s policy decisions as president.

During his previous term in the White House, he publicly criticized Powell when the Fed raised rates. The latest statement made no mention of Trump’s election victory.

And Powell said it would have no impact on his decisions in the short term, but that, like any other administration, it could adopt policies that do – although details are not yet known. He said nothing to rule out an expected further rate cut next month.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, said: ‘At this early stage, the likelihood, size and timing of Trump’s proposed tariffs on imports and tax cuts are too uncertain for the Fed to make a judgment on them, even if they bring entails material upside risks. for the inflation outlook.

“With the Fed’s independence at risk of being undermined during Trump’s term, Powell and other Fed officials will certainly remain as quiet as possible for as long as possible.”

Ryan Detrick, chief market strategist at Carson Group, said: “The Fed hasn’t rocked the boat. The big question now is: will they start cutting again in December? Our best guess is that this is the case as inflation continues to improve.”