The Federal Open Market Committee lowered the federal funds rate for the third meeting in a row despite elevated inflation.
The Federal Reserve, the central bank of the United States, voted to lower its federal funds rate—the interest rate that banks charge each other to borrow overnight and the cost of credit—by 25 basis points on Wednesday. This is the Fed’s third rate cut in as many months and the lowest federal funds rate in three years.
The move comes amid lackluster employment numbers and the Supreme Court hearing Trump v. Slaughter, a case in which it is likely to overturn Humphrey’s Executor, a decision that would likely grant the president license not only to remove executive agency bureaucrats but to replace the Fed’s Board of Governors. In view of these pressures, the Federal Open Market Committee (FOMC), led by Fed Chair Jerome Powell, may be preemptively catering to President Donald Trump’s calls to lower interest rates in a bid to avoid replacement if and when Humphrey’s Executor is overturned.
Trump has been egging the FOMC, the Fed’s key policymaking body, to lower rates since this summer. In June, the president sent Powell a letter saying, “we should be paying 1% Interest, or better!” In late July, with year-over-year inflation at 2.6 percent, well above the Fed’s 2 percent target, Powell and all but two members of the 12-member FOMC wisely held the fed funds target constant. However, in mid-September, the Fed decreased the fed funds rate by 25 basis points, lowering the upper bound rate from 4.
