Bumper US interest rate cut aims to boost flagging economy
US interest rates have been slashed for the first time in more than four years – by more than many expected – amid fears the world’s largest economy is flagging.
The US central bank, the Federal Reserve, brought interest rates down by 0.5 percentage points to 4.75% to 5%.
Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
Read more: What next for interest rates?
Bringing down inflation to 2% is a primary goal of the Fed and it has used interest rates to draw money out of the economy by making borrowing more costly since 2022, when the Ukraine/Russia price shock hit.
Keep up with all the latest news from the UK and around the world by following Sky News
Recent figures show the Fed is not far from its inflation target – with the main measure hitting 2.5% in August, the lowest rate in three years.
But signs of a weakening economy emerged last month as data on job creation led to recession fears.
The Fed signalled in its statement that while it was confident on both the inflation and growth outlooks, a slowdown in the pace of hiring was a cause for concern.
Only one member of its rate-setting committee dissented on the 0.5 percentage point reduction. Financial market participants had been split on whether it would go for the 0.25 option instead.
US stocks rallied in the wake of the decision, with the Dow Jones Industrial Average and broader S&P 500 both up by more than 0.5% from flat positions moments before the rate decision was revealed.
Please use Chrome browser for a more accessible video player
Trump criticises Harris on economy
The dollar was trading a cent lower versus sterling at $1.32.
Some market analysts said the Fed’s move showed Fed chair Jay Powell and his fellow policymakers had been too slow to react to the employment slowdown.
He told reporters: “We’re going to be making decisions meeting by meeting, based on the incoming data and the evolving outlook, the balance of risks… it’s a process of recalibrating our policy stance away from where we had it a year ago, when inflation was high and unemployment low, to a place that’s more appropriate given where we are now and where we expect to be.
Federal Reserve Chairman Jerome Powell Pic: AP
“That process will time time”, he added, saying there would be no “rush”.
Michael Sheehan, fund manager of fixed income at EdenTree Investment Management, said: “Kicking off this cutting cycle with a 50 basis point reduction will undoubtedly vindicate those who had argued that the Fed had fallen behind the curve.
“Any doubts that this cutting cycle would be any less dramatic than previous ones have been firmly laid to rest.
“We expect this larger cut of 50 basis points to boost risk assets in the short term. The key for markets, and indeed the Federal Reserve, will be how far the softening of the labour market has to run.
“Powell will be hoping that taking aggressive action early will go some way to curtailing a substantial weakening and achieve the elusive soft landing.”
What about the UK?
It comes as the UK central bank the Bank of England meets on Thursday to make its own interest rate decision.
While the Bank will focus on UK economic data – and on Wednesday afternoon was expected by markets to hold rates – it could be influenced by US decision-making.
Lower interest rates tend to weaken currencies, so a big cut from the Fed could be good news for the pound.
While being able to buy more dollars is good news for people holidaying in the US and paying for imports like oil, it’s bad news for exporters who get less for their goods as a result and have a less competitive product.
Lower exports can slow inflation, meaning the Bank could be more likely to cut.
US
Donald Trump says Vladimir Putin wants to meet – and that he and Barack Obama ‘probably’ like each other
Donald Trump says a meeting is being set up between himself and Vladimir Putin – and that he and Barack Obama “probably” like each other.
Republican US president-elect Mr Trump spoke to reporters at his Mar-a-Lago resort in Florida on Thursday, saying Russian president Mr Putin “wants to meet, and we are setting it up”.
“He has said that even publicly and we have to get that war over with. That’s a bloody mess,” Mr Trump said.
Kremlin spokesperson Dmitry Peskov said on Friday there was a “mutual desire” to set up a meeting – but added no details had been confirmed yet and that there may be progress once Mr Trump is inaugurated on 20 January.
“Moscow has repeatedly declared its openness to contacts with international leaders, including the US president, including Donald Trump,” Mr Peskov added.
“What is required is a mutual desire and political will to conduct dialogue and resolve existing problems through dialogue. We see that Mr Trump also declares his readiness to resolve problems through dialogue. We welcome this. There are still no specifics, we proceed from the mutual readiness for the meeting.”
Donald Trump and Vladimir Putin in July 2017. Pic: AP
Trump on Obama: ‘We just got along’
Mr Trump also made some lighter remarks regarding a viral exchange between himself and former Democrat President Barack Obama at Jimmy Carter’s funeral on Thursday.
The pair sat together for the late president’s service in Washington DC on Thursday, and could be seen speaking for several minutes as the remaining mourners filed in before it began.
Mr Obama was seen nodding as his successor spoke before breaking into a grin.
Asked about the exchange, Mr Trump said: “I didn’t realise how friendly it looked.
“I said, ‘boy, they look like two people that like each other’. And we probably do.
“We have a little different philosophies, right? But we probably do. I don’t know. We just got along. But I got along with just about everybody.”
The amicable exchange comes after years of criticising each other in the public eye; it was Mr Trump who spread the so-called “birther” conspiracy theory about Mr Obama in 2011, falsely asserting that he was not born in the United States.
Read more:
Trump to be sentenced today over porn star hush money
The Hollywood celebrities who have lost homes to wildfires
Insults continued for years, with Mr Obama famously dedicating much of his final White House Correspondents’ Dinner speech in 2016 to jokes at his political rival’s expense.
Mr Trump has repeatedly attacked the Obamas, saying the former president was “ineffective” and “terrible” and calling former first lady Michelle Obama “nasty” as recently as October last year.
On Kamala Harris’s campaign trail last year, Mr Obama said Mr Trump was a “78-year-old billionaire who has not stopped whining about his problems since he rode down his golden escalator nine years ago”, while the former first lady said that “the consequences of him ever being president again are brutally serious.”
“He was asleep in his bed, where he still is right now, as I wait on the coroner.”
The haunting words of Kimiko Nickerson stopped us in our tracks.
Her father Rodney, 82, was sure the fire wouldn’t reach his home in Altadena. He was wrong.
The inferno cut through this quiet suburb north of Los Angeles at an alarming rate, its path unpredictable.
California wildfires latest – new evacuation order issued
She said: “He just didn’t want to evacuate. He’s been living here since 1968, and he’s been in Altadena my whole life.
“Like all of us on this block, in four blocks, he didn’t think it was going to be this devastating.
“It jumped whole streets, and it hit this community, but it didn’t touch the mountainside at all.”
They’re still trying to process the apocalyptic scenes here and grieving for those who did not get out.
Kimiko said: “I have no words to explain my feelings at this point in time.
“I’m just silent and numb and just mentally trying to go through the process.”
Rodney Nickerson decided not to leave his Altadena home.
Pic: Kimiko Nickerson
‘Truly apocalyptic scenes’ as flames swallow homes in LA wildfires evacuation zone
It would be impossible to exaggerate the scale of the destruction, cars burnt to a cinder, palm trees still alight, powerlines strewn across roads.
So many people have lost the roof over their head but there’s one thing Kimiko says she’ll never lose – her memories.
“Every laugh, every joke he told.
“He was a smart man. He read the LA Times from cover to cover and walked around the Rose Bowl every day.
“He was healthy, he was ambitious… but he went to sleep and died in his bed back there.”
The US Supreme Court has rejected a last-ditch attempt by Donald Trump to delay sentencing in the Stormy Daniels hush money case.
The president-elect was convicted on 34 counts last May in New York of falsifying business records relating to payments made to Ms Daniels before the 2016 presidential election.
Prosecutors claimed he had paid her $130,000 (£105,300) in hush money to not reveal details of what Ms Daniels said was a sexual relationship in 2006.
Mr Trump has denied any liaison with Ms Daniels or any wrongdoing.
By a majority, the Supreme Court found his sentencing would not be an insurmountable burden during the presidential transition since the presiding judge, Juan M Merchan, has indicated he will not give Mr Trump jail time, fines or probation.
Mr Trump’s attorneys argued that evidence used in the Manhattan trial violated last summer’s Supreme Court ruling giving Mr Trump broad immunity from prosecution over acts he took as president.
At the least, they said, the sentencing should be delayed while their appeals play out to avoid distracting Mr Trump during the presidential transition.
A guide to everything that will happen on 20 January
Stormy Daniels. Pic: AP
Mr Trump’s attorneys went to the justices after New York courts refused to postpone sentencing.
Judges in New York found that the convictions related to personal matters rather than Mr Trump’s official acts as president.
Mr Trump’s attorneys called the case politically motivated, and they said sentencing him now would be a “grave injustice” that threatens to disrupt the presidential transition as the Republican prepares to return to the White House.
Mr Trump has said he will appeal again: “I respect the court’s opinion – I think it was actually a very good opinion for us because you saw what they said, but they invited the appeal and the appeal is on the bigger issue. So, we’ll see how it works out,” he said at a dinner with Republican governors at his private club in Florida.
Because the New York case was a state, rather than federal crime, Mr Trump will not be able to pardon himself when he takes office on 20 January.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports9 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway