Federal Reserve cuts interest rates, again: Trump effect?

On Thursday, just days after America elected Donald Trump as its next president, the Federal Reserve cut interest rates by a quarter of a percentage point – to a range of 4.5% to 4.75%. It has been just six weeks since the last rate cut of 50 basis points. Federal Reserve Chair Jerome Powell said rates were still headed down but was noncommittal on the pace, however, this is the second time this year the Fed cut its lending rate, as inflation continues to inch closer to the Fed’s target of 2%.

In September, the Fed had signaled another quarter-point cut in December and four in 2025, so it’s possible the cut is due to the re-election of Donald Trump to president earlier this week, although when asked at a press conference how Trump’s election might affect the Fed’s policymaking, Powell said “the election will have not effects on our [interest rate] decisions.”

Nonetheless, voters in the presidential election frequently said that the economy, and high prices, were a deciding factor in their decision making.  Fed policymakers had projected in September that interest rates would drop by another full point next year. After its policy meeting ended Thursday, the Fed issued a statement that while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”

Trump appointed Powell to his position in 2018, during his last term as President. At a press conference on Thursday, Powell was asked by a reporter if he would resign if President-elect Trump demanded it, and he said, “No.” He also said removal or demotion of any Fed board leaders, including himself, is “not permitted by law.”

By design, the central bank is an independent agency and supposed to be insulated from political pressure. Yet in his previous term as president, Trump publicly attacked Powell after the Fed raised rates to fight inflation.

Powell’s term expires in May 2026. Powell had previously said he wouldn’t resign if Trump asked him.

Related: Wage war: Some jobs win, others lose in inflation battle

Trump has promised policies that would deploy more aggressive tariffs, depart thousands of immigrants living in the U.S. illegally and extend tax cuts that could put pressure on prices and long-term interest rates – and prompt the Fed to scale back rate reductions.

The Fed’s next meeting is Dec. 17 and some experts are forecasting another quarter-point cut at that meeting.