Fed Cuts Interest Rates Again—But Uncertainty Swirls As Trump Policies Could Fuel Inflation

The Federal Reserve lowered the federal funds rate for a second consecutive time Thursday, but the economic policies floated by President-elect Donald Trump have some economists questioning the path of interest rates heading into next year.

At the conclusion of the policy-setting Federal Open Market Committee’s two-day meeting, the central bank announced it cut the federal funds rate by 25 basis points to 4.5% to 4.75%, the lowest level since March 2023.

The announcement comes on the heels of the central bank’s September summit, in which the Fed announced the first rate cut since March 2020, rolling out a supersized 50 basis-point move.

Economists and investors alike heavily anticipated the 0.25 percentage-point cut Thursday, as the CME Group’s FedWatch Tool, which tracks derivatives contracts betting on the federal funds rate, priced in a 99% chance of that magnitude of a cut.