US Fed cuts key interest rate by 0.25%; unemployment rate remains low

The central bank's key lending rate was lowered to between 4.25 per cent and 4.5 per cent, the Fed announced in a statement.

Recent indicators suggest that US economic activity has continued to expand at a solid pace, the statement said.

Since earlier in the year, labour market conditions have generally eased, and the unemployment rate has moved up, but remains low. Inflation has made progress toward the Federal Open Market Committee's (FOMC) 2-per cent objective, but remains somewhat elevated compared to the Fed's long-term target of 2 per cent, it noted.

He said he remained "very optimistic" about the state of the US economy, adding that the Fed was now "significantly closer" to the end of its current easing cycle.

This was the final planned interest rate decision before outgoing President Joe Biden makes way for Donald Trump.

The Fed recently began cutting rates to boost demand and support the labour market.

In updated economic forecast published alongside the rate decision, FOMC members forecast just two quarter-point rate cuts in 2025 on an average, halving the number of cuts they now expect.

They also hiked their outlook for headline US inflation next year to 2.5 per cent, and do not see it returning to 2 per cent before 2027.

FOMC members also raised their outlook for growth this year to 2.5 per cent and to 2.1 per cent next year.

Policymakers expect the unemployment rate to be slightly lower this year than 4.2 per cent predicted earlier, before ticking up slightly to 4.3 per cent in 2025 and 2026.

ALCHEMPro News Desk (DS)