The Federal Reserve cut interest rates by a quarter of a percentage point but signalled a slower pace of easing next year, sending the dollar racing to a two-year high and igniting a sell-off in US stocks. The Federal Open Market Committee on Wednesday voted to reduce benchmark rate to 4.25 per cent to 4.5 per cent, its third cut in a row. Cleveland Fed president Beth Hammack casting a dissenting vote, preferring to hold rates steady.
Inflation was moving “sideways”, Powell added, while risks to the labour market had “diminished”. The Fed’s goal is to apply enough pressure on consumer demand and business activity to push inflation back to the US central bank’s 2 per cent target without harming the jobs market or the economy more broadly. The core personal consumption expenditures price index, the Fed’s preferred inflation gauge that strips out food and energy prices, rose at an annual rate of 2.8 per cent in October.