Fed Cuts Rates, Markets Soar After Trump Victory
Fed Cuts Rates, as Markets Soar After Trump's Victory
The Facts
Major stock indexes reached record highs with the S&P 500 gaining 0.74% to 5,973.10 and the Nasdaq advancing 1.51% to 19,269.46, while the Dow Jones remained relatively flat at 43,729.34.The Federal Reserve on Thursday unanimously approved a quarter-point interest rate cut, bringing the federal funds rate to a range between 4.5 and 4.75%, following Tuesday's reelection of former Pres. Donald Trump.
The rate reduction represents a smaller move compared to September's half-point cut, as the Federal Reserve aims to maintain economic strength while keeping inflation near its 2% target.The reduction is a smaller move compared to September's half-point cut, as the Federal Reserve is seeking to maintain economic strength while keeping inflation on track to meet its 2% target. Over the summer, the Fed started this process by raising the rate to a range of 5.25 to 5.5% — a 23-year high.
The Spin
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Don't start celebrating this announcement as some sort of product of Trump's reelection just yet. This cut was made possible because inflation significantly cooled under the Biden administration. But there's a softening job market, and if Trump goes through with some of his promised economic policies another rate cut may not come, or worse, the economy could head in the opposite direction.
