Interest rates slashed by another 25 basis points; Federal Reserve chair Jay Powell affirms US economy resilience and data-focused decision making amid ongoing political changes, rules out resignation until end of term
The Federal Reserve lowered its benchmark interest rate by a quarter point in its most recent monetary policy decision, lowering the target range down to 4.5%–4.75%.
This choice is in line with endeavors to support the US economy, which Fed Chair Jay Powell commended for its tenacity. He emphasized a careful approach to reaching the “neutral” rate level that preserves inflation stability while preventing economic overheating, arguing that present economic conditions do not call for rushed rate decreases. The rate cut comes after a half-point cut in September that was intended to boost the labour market.
Despite the Fed’s nonpartisan mandate, the action comes as the White House and Senate were seized by Republicans after the 2016 election, and Powell said he has no intention of stepping down despite possible pressure from incoming President Donald Trump. Some analysts worry that Trump’s proposed trade policy changes, tax cuts, and widespread deregulation could impede economic growth and increase inflation.
Immediate Impact on World Indices
Though the financial markets fluctuated owing to the recent elections, major global indices jumped green indicating a positive response. The S&P increased by 0.7%, with weekly gains approaching 4.2% – one of the strongest weeks for the index in the year.
In response, U.S. Treasury yields adjusted, indicating the Fed’s impact on borrowing costs and the national deficit—a factor that is still being scrutinized as Trump looks to extend previous tax cuts. In contrast to the 10-year yield, which declined nearly 10 basis points to 4.33%, the two-year yield dipped 6 basis points to 4.197%.
Impact on the Bond Market

The U.S. and U.K. key bond markets indicator, sovereign break-even points have increased due to rising inflation predictions. Two-year break-evens in the US reached 2.6% as Trump’s policies fueled concerns of persistent price increases.
Investors are factoring in these initiatives as a “reflationary cocktail” that could have a substantial effect on price levels in the US economy.
Bond markets are being impacted by this change in inflation expectations, and many are keeping an eye on whether it will impact long-term interest rates or result in changes to future monetary policies of the US Federal Reserve.
Powell clarifies Fed’s approach
Powell responded to enquiries about policies amid the new government by saying the Fed would continue to follow data rather than making speculative predictions about future policy changes.
According to him, modifications will be contingent on “material” and “persistent” changes in borrowing costs based on data movement rather than on pre-set forecasts.
On this, Deutsche Bank’s chief US economist, Matthew Luzzetti says that Powell is beginning to “set up the case for skipping a meeting or pausing rate cuts at some point in time”.
Balancing Inflation and Unemployment
Despite the current slowdown, the labor market is strong even though inflation has gone down from last year’s peak of 7% to almost the Fed’s 2% objective. Natural disasters and strikes had an impact on the October employment data, which showed a small 12,000 boost in jobs.
The Fed’s strategy aims to cautiously cut rates in order to balance inflationary pressures and maintain economic growth as long as labor conditions remain strong.