Federal Reserve lowers interest rates in the year's initial move, following a heated exchange between Trump and the Federal Reserve officials
Central Banks Take Action to Combat Inflation
The Federal Reserve and the Bank of England have taken steps to address ongoing inflation concerns, with the Fed cutting interest rates in the United States last night and the Bank of England expected to maintain its current rates for the rest of the year.
In the US, the Fed reduced its benchmark rate by 0.25 percentage points, bringing the range for the federal funds rate to between 4% and 4.25%. This is the first rate cut since December last year, and it comes as inflation in the US remains below the 3.8% rate seen in the UK.
The latest jobs report shows only 22,000 were added in the US last month, fueling concerns about the health of the US economy. However, only Stephen Miran, Trump's top economic adviser and a new Fed member, voted for a larger, 0.5 percentage point, cut.
Meanwhile, in the UK, the Bank of England is battling stubbornly high inflation. Inflation in August remained at 3.8%, higher than the Bank's 2% target and the highest in the G7. As a result, no further cuts in interest rates are expected this year, and only one or two are predicted in 2026.
Fed chairman, Jerome Powell, admitted that inflation remains 'somewhat elevated' above the 2% target at 2.9%. He also stated that job gains have slowed and downside risks to employment have risen. Laith Khalaf, head of investment analysis at AJ Bell, says the UK has an inflation problem which is keeping the Bank of England in cautious mode on interest rates.
Suren Thiru, economics director at the ICAEW accountancy body, states that the inflation figures 'are the final nail in the coffin for hopes of a rate cut' today. He added that the UK's inflation problem is likely to persist for some time, making it difficult for the Bank of England to lower interest rates in the near future.
For investors, the current economic climate presents both challenges and opportunities. Comparison of various investing platforms such as AJ Bell, Hargreaves Lansdown, interactive investor, InvestEngine, and Trading 212 is available in the article to help investors make informed decisions.
As the global economy continues to navigate the impact of inflation, central banks will likely remain focused on managing monetary policy to support growth and stability. Stay tuned for updates as the situation develops.
Read also:
- Deepwater Horizon Oil Spill: BP Faces Record-Breaking Settlement - Dubbed 'Largest Environmental Fine Ever Imposed'
- Cars' Environmental Impact Explained
- Lawsuit of Phenomenal Magnitude: FIFA under threat due to Diarra's verdict, accused of player injustice
- Union IG Metall advocates for a swifter expansion of electrical mobility in the Eastern region.
