US Fed cuts interest rates a quarter point after Trump victory

On the campaign trail, Trump repeatedly accused Mr Powell – whom he first appointed to run the US central bank – of working to favour the Democrats, and has suggested he would look to replace him once his term as Fed chairman ends.

The President-elect has also said he would like “at least” a say over setting Fed interest rates, something not currently allowed under the bank’s dual mandate from Congress to act independently to tackle both inflation and unemployment.

The US central bank’s rate decision should help ease the costs of mortgages and other loans – welcome news for consumers, who had widely cited the cost of living as a top concern ahead of the Nov 5 vote.

But the cost of borrowing will also depend on what the financial markets think a Trump victory means for the economy over the longer term, and where the Fed’s interest rates will need to settle to ensure inflation remains now.

Experts have pointed to the post-pandemic surge in US inflation – which saw consumer prices rise more than 20 per cent – as playing a major factor in Trump’s victory.

The Nov 7 decision adds to a previous rate cut in September, when the Fed kicked off its easing cycle with a larger half-point decrease, and pencilled in additional rate reductions in 2024.

The Fed’s favoured inflation gauge has since eased to 2.1 per cent in September, while economic growth has remained robust.

The labour market has also stayed strong overall, despite a sharp hiring slowdown in October attributed in large part to adverse weather conditions and a labour strike.