Trump finally gets his demand for a US rate cut

The US central bank has cut interest rates for the first time this year, in a move president Donald Trump will likely declare is long overdue.

Mr Trump has demanded cuts to borrowing costs from the Federal Reserve ever since worries emerged in the world’s largest economy that his trade war would stoke US inflation.

The president – currently in the UK on a state visit – has, on several occasions, threatened to fire the Fed chair Jay Powell and moved to place his own supporters on the bank’s voting panel.

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He was yet to comment on the rate decision.

The fallout from the row has resonated globally, sparking worries about central bank independence. Financial markets have also reflected those concerns.

The bank, which has a dual mandate to keep inflation steady and maintain maximum employment, made its move on Wednesday after a major slowdown in the employment market that has seen hiring ease sharply.

The latest economic indicators have shown caution over spending among both companies and consumers alike.

The Fed said the economy had moderated.

Inflation, while somewhat elevated due to the effects of higher import costs from the trade war, has not taken off as badly as some economists, and the Fed, had initially feared.

Its 12-member panel backed a quarter point reduction in the Fed funds rate to a new range of between 4% to 4.25%.

The effective interest rate is in the middle of that range.

Crucially for Mr Trump, who is trying to inspire growth in the economy, the Fed signalled more reductions ahead despite continued concern over inflation.

Financial markets saw a further two quarter point rate cuts before the year’s end.

The dollar, which has weakened in recent days on the back of expectations of further rate cuts, fell in the wake of the decision and the Fed’s statement.

It was trading down against both the euro and pound. Sterling was almost half a cent up at $1.17.

This Fed meeting was the first with new Trump appointee Stephen Miran on the voting panel.

He was chairman of the president’s Council of Economic Advisers before being handed the role this week.

His was a sole voice in the voting for a half percentage point cut. It is clear, though the identity of participants’ forecasts are not revealed, he was the lone voice in calling for a further five quarter point reductions this year.

Mr Trump has sought to fire a member of the Fed’s board, Lisa Cook, to bolster his position further but that decision is currently subject to a legal challenge.