Despite the uncertainty brought about by Donald Trump’s recent victory in the U.S. presidential election, the Federal Reserve (Fed) announced today that it is lowering interest rates by 25 basis points. This decision is part of the central bank’s ongoing efforts to address cooling inflation and reduce borrowing costs for consumers and businesses.

The U.S. Department of Labor reported last month that the Consumer Price Index (CPI) increased by 2.4% in September compared to the same month last year. This figure represents a slight decline from August’s annual increase of 2.5%, marking the smallest year-over-year rise since February 2021. The Fed’s decision to cut rates is seen as a proactive measure to support economic growth in light of these inflation trends.

Prior to the Fed’s announcement, market analysts widely anticipated a 25 basis point reduction, which would adjust the federal funds rate target range to between 4.50% and 4.75%. This rate cut is significant as it indicates the Fed’s commitment to fostering economic stability amidst potential challenges posed by the election outcome.

The Federal Reserve had previously implemented substantial rate cuts in March 2020 during the onset of the COVID-19 pandemic. However, in March 2022, the central bank began a cycle of interest rate increases aimed at combating rising inflation. The recent decision to lower rates marks the first cut since mid-September, when the Fed reduced rates by 50 basis points, the largest decrease since March 2020.

As the Fed navigates the uncertain political landscape and its potential economic implications, this rate cut reflects a cautious approach to monetary policy, aiming to support recovery while keeping inflation in check.