The Federal Reserve cut its key rate on Thursday, one of many factors that will decide what kind of economy Americans remember from President Joe Biden’s final days in office and what is left for President-elect Donald Trump as he begins his second term. .

The Federal Reserve cut the rate by a quarter percentage point, which was in line with economists’ expectations. The Federal Open Market Committee’s vote was unanimous in favor of the cut. in your previous meeting In September, the Federal Reserve cut the rate by half a percentage point for the first time in four years as inflation continued to show signs of cooling and moved toward its 2% target rate.

Chairman Jerome Powell said the labor market remains strong, economic activity has continued to expand and consumer spending is resilient. He said inflation is close to the Federal Reserve’s 2% target, at 2.1% in September, and that core inflation, which excludes food and energy, remains elevated at 2.7%.

“We remain confident that with an appropriate recalibration of our policy stance, the strength of the economy and labor market can be maintained and inflation will sustainably decline to 2%,” Powell said.

The Federal Reserve’s new reference rate is 4.5% to 4.75%. It is the Federal Reserve’s second cut since it suspended rates last year following an aggressive rate-raising campaign to control inflation. The Fed raised rates 11 times between March 2022 and July 2023.

Dante DeAntonio, labor economist at Moody’s Analytics, said the general public probably won’t feel a significant change from an individual rate cut, but he expects that in the medium term, the cuts will affect housing and consumer spending.

“I think generally speaking we should expect to see rates across the spectrum go down, from credit card rates to auto loans to mortgages, but that’s not going to happen quickly – day by day. or month by month, and it is not going to have a big impact,” he stated.

The Bureau of Labor Statistics released a less-than-stellar jobs report on Friday, showing the labor market only increased 12,000 jobs. But Powell said Thursday that this was mainly due to strikes and major hurricanes, and that job growth would have been higher if not for these factors.

Trump’s election on Tuesday could mean substantial changes for the economy and has implications for the policy decisions of the Federal Reserve itself.

If Trump is able to fully implement the ideas he raised during his campaign, such as heavy tariffs on imports from China and the mass deportation of immigrants, could reduce household purchasing power and hurts labor supply, some policy experts, researchers and economists say.

Indivar Dutta-Gupta, who focuses on policy research and seminars at Georgetown University’s McCourt School of Public Policy, said Trump’s immigration policies could result in a large reduction in labor supply.

“The economy has benefited and native workers have benefited in recent years from the growth of workers arriving from abroad. You would expect that to slow down and potentially go in the other direction,” Dutta-Gupta said.

Mark Zandi, chief economist at Moody’s Analytics, said that based on what we know now about Trump’s proposals, the Federal Reserve will have to deal with an inflationary environment.

“The policies President Trump adopted during the election campaign, including higher broad-based tariffs, mass deportations of unauthorized immigrants already in the country, tax cuts that are largely financed by the deficit, and the opinion that the president should participate in the decision. “The Federal Reserve’s process of setting interest rates is inflationary,” he said.

This could mean that in the future, the Federal Reserve is less likely to continue cutting rates and potentially raise them.

“It all depends on whether and to what extent President Trump follows through on what he said during the campaign and over what period of time. But all of those things are heading toward higher inflation, which means higher interest rates than would otherwise be the case,” he added.

Trump has talked about the possibility of the president having more “say” over the Federal Reserve’s decisions during the election campaign. During his first term, he was very vocal in his discontent with some of the Federal Reserve’s decisions on interest rates.

in october he said that although he should not be able to order the Federal Reserve to make the decisions he prefers, “I believe I have the right to comment on whether or not interest rates should go up or down.”

Powell on Thursday responded to questions about the effect of a second Trump administration on the independence of the Federal Reserve. When asked if the president can demote him or other Federal Reserve leaders, he said: “The law doesn’t allow it.”

The Federal Reserve is designed to operate with datanot politics.

Powell said the election will have no effect on the Federal Reserve’s policy decisions in the short term. He added that the Federal Reserve does not yet know the timing or policy substance of the incoming administration.

“We don’t guess, we don’t speculate and we don’t assume,” he said.