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
Pam Bondi: Key proponent of Trump’s false 2020 election claims set to head justice department after Gaetz withdrawal
Donald Trump has pledged for years to surround himself with ultra-loyalists who can mould his government to his vision without barriers.
That’s precisely why he picked Matt Gaetz. Now he’s out, Pam Bondi is in and she’s equally loyal.
Gaetz was uniquely unpopular on Capitol Hill but ultra-MAGA and ultra-loyal to the president-elect.
He was chosen by the president-elect to do his bidding inside the Justice Department as attorney general.
Critics called his pick “a red alert moment for democracy” and the man a “gonzo agent of chaos” – language that would surely only affirm Trump’s decision in his own proudly disruptive mind.
Matt Gaetz has withdrawn despite Trump putting him forward for attorney general. Pic: AP
If it wasn’t for the fact that the president-elect is himself a convicted felon, and a man found liable in a civil court of his own sexual offences, the prospect of Gaetz, with all his baggage, making it through the nomination process would have seemed remote.
But Donald Trump’s return to the White House suggested anything is possible.
And so, beyond his loyalty, Gaetz was Trump’s test for his foot soldiers on Capitol Hill. How loyal were they? Would they wave through anyone he appointed?
It turns out that Gaetz, and the storm around his private life, was too much for a proportion of them.
At least five Senate Republicans were flatly against Matt Gaetz’s confirmation. We understand that they communicated to other senators and those close to Trump that they were unlikely to be swayed.
They included the Republican old guard like Senator Mitch McConnell.
Beyond the hard “no” senators, there were between 20 and 30 other Republicans who were very uncomfortable about having to vote for Gaetz on the Senate floor.
Please use Chrome browser for a more accessible video player
Trump pick Matt Gaetz withdraws
The key question is whether Gaetz was Trump’s intentional wild card crazy choice that he knew, deep down, would probably never fly.
Was Gaetz the candidate he had accepted would be vetoed by senators – who would then feel compelled to wave the rest of his nominees through?
Will Pete Hegseth’s alleged sexual impropriety concern them as they consider the suitability of the former Fox News host and army major to run the Department of Defence?
What about Tulsi Gabbard, the candidate Russian state TV calls ‘our girl’, and the appropriateness of her running America’s intelligence agencies?
These are all appointments that the politicians on Capitol Hill must consider and confirm in the weeks ahead.
Read more:
Trump hands out top jobs: Who is in, who is out
Musk picked to head up Trump’s new efficiency department
We don’t yet know who Trump will choose to direct the FBI.
There are some names being floated which will make the establishment of Washington shudder but then that’s precisely why Trump was elected. He is the disrupter. He said so at every rally, on repeat.
He was quick to pivot to another name to replace Gaetz.
Bondi is the former attorney general of Florida. Professionally she is in a different league to Gaetz. She’s been a tough prosecutor, with a no-nonsense reputation.
She is also among the most loyal of loyalists. Her attachment to Trump stretches way back.
Pam Bondi speaks during a Trump rally in November 2024. Pic: Reuters
I first came across her in Philadelphia in November 2020 when she was among Trump surrogates claiming the election back then had been stolen from them by Joe Biden and the Democrats.
She was a key proponent of the false claims the election had been rigged and Trump was the rightful winner.
The court cases concluding that was all nonsense didn’t seem to convince her.
Now she is poised to head up the Department of Justice as the country’s top law enforcement official.
US
Donald Trump on day one: Pace of change ‘like nothing you’ve seen in history’, warns campaign official
Within hours of taking office, president-elect Donald Trump plans to begin rolling out policies including large-scale deportations, according to his transition team.
Sky News partner network NBC News has spoken with more than half a dozen people familiar with the executive orders that his team plans to enact.
One campaign official said changes are expected at a pace that is “like nothing you’ve seen in history”, to signal a dramatic break from President Joe Biden’s administration.
Mr Trump is preparing on day one to overturn specific policies put in place by Mr Biden. Among the measures, reported by sources close to the transition team, are:
• The speedy and large-scale deportations of illegal immigrants
• Ending travel reimbursement for military members seeking abortion care
• Restricting transgender service members’ access to gender-affirming care
But much of the first day is likely to focus on stopping illegal immigration – the centrepiece of Trump’s candidacy. He is expected to sign up to five executive orders aimed at dealing with that issue alone after he is sworn in on 20 January.
“There will without question be a lot of movement quickly, likely day one, on the immigration front,” a top Trump ally said.
“There will be a push to make a huge early show and assert himself to show his campaign promises were not hollow.”
Please use Chrome browser for a more accessible video player
Donald Trump ally Matt Gaetz has withdrawn his name from consideration to be the next US attorney general.
But Mr Trump’s campaign pledges also could be difficult to implement.
Deporting people on the scale he wants will be a logistical challenge that could take years. Questions also remain about promised tax cuts.
Meanwhile, his pledge to end the war between Russia and Ukraine in just 24 hours would be near impossible.
Read more:
Police file on Trump pick, Pete Hegseth
Matt Gaetz withdraws from top job
Watch: Musk and Trump’s bromance
Even so, advisers based at Mr Trump’s Mar-a-Lago resort or at nearby offices in West Palm Beach, Florida, are reportedly strategising about ending the wars in Ukraine and the Middle East.
Following his decisive victory on 5 November, the president-elect has moved swiftly to build a cabinet and senior White House team.
As of Thursday, he had selected more than 30 people for senior positions in his administration, compared with just three at a similar point in his 2016 transition.
Stephen Moore, a senior economic adviser in Mr Trump’s campaign, told NBC News: “The thing to realise is Trump is no dummy.
“He knows he’s got two to three years at most to get anything done. And then he becomes a lame duck and we start talking about [the presidential election in] 2028.”
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports8 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
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