The U.S. central bank cut interest rates on Wednesday, as expected, but Federal Reserve Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, remarks that showed policymakers are starting to reckon with the prospects for sweeping economic changes under a Trump administration. Powell's explicit - and repeated - references to the need for caution from here on jolted Wall Street, sending stocks sharply lower, bond yields higher and leading investors to dial back estimates of how far borrowing costs are likely to fall over the coming year.
"I think we're in a good place, but I think from here it's a new phase and we're going to be cautious about further cuts," Powell said at a press conference after the central bank's policy-setting Federal Open Market Committee cut its benchmark interest rate by a quarter of a percentage point at the end of a two-day meeting. Powell described at length the ways in which inflation has improved since peaking in 2022, as well as the ways it has disappointed by moving "sideways" in recent months, with shelter costs improving more slowly than the Fed expected. While he said the Fed remained confident price pressures would continue to ease, he also acknowledged central bank staff and policymakers were beginning to at least preliminarily think through how President-elect Donald Trump's promises of higher tariffs, tax cuts and tougher immigration policy will change the outlook.
Source: Reuters
