The key interest rate will now lie in an interval between 4.5 and 4.75 per cent.
The decision was unanimous, according to the central bank. The bank points, among other things, to an easier situation on the labor market, and that there has been progress towards the long-term goal of keeping inflation below 2 per cent.
The bank plans further cuts during the year.
President-elect Donald Trump is expected to stand for a policy that increases the budget deficit in the United States, which could result in higher interest rates.
Despite the political upheavals this week, it is expected that the US central bank, the Federal Reserve, will stick to its plan for the economy.
– We don’t guess
– In the short term, the election will have no impact on our political decisions, central bank governor Jerome Powell said at a press conference after the interest rate meeting.
– We don’t guess, we don’t speculate and we don’t assume what future political decisions from the authorities will be, he continued.
According to CNN, Trump will probably let Powell continue as central bank chief until the end of his term in May 2026. It is a high-ranking adviser to the incoming president who informs the channel of this.
Will not resign
Powell was asked at the press conference whether he would resign if Trump, who himself appointed Powell in 2017, whether he would resign if asked.
– No, was the short answer.
Thursday’s interest rate cut follows the first cut in four years in September, when interest rates were lowered by 0.5 percentage points.
Since September, inflation in the US has fallen to 2.1 per cent, while economic growth has remained robust.
Analysts therefore believe that the Americans can expect another interest rate cut in December.
Good news for Norwegians
Earlier on Thursday, Norges Bank chose to keep the policy rate unchanged at 4.5 per cent. Central bank governor Ida Wolden Bache announced at the same time that interest rates will probably not fall during the year.
For Norway, it is good news that the American central bank is lowering interest rates, says chief economist Kyrre M. Knudsen at Sparebank 1 Sør-Norge.
– Although Norges Bank pointed out today that the interest rate will remain unchanged for the rest of the year, interest rate cuts in the USA and other countries contribute to making it easier for Norges Bank to get started with interest rate cuts eventually, Knudsen tells NTB.
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**Interview with Dr. Emily Thompson, Economic Analyst**
**Interviewer:** Thank you for joining us today, Dr. Thompson. The Federal Reserve recently announced a significant interest rate cut of 0.50%, bringing the rate down to a range of 4.75 to 5.00%. What does this mean for the overall economy?
**Dr. Thompson:** Thank you for having me! This cut is quite noteworthy, especially since it’s larger than we often see. The Federal Reserve has indicated that they’re responding to a deceleration in inflation and some softer data in the labor market. By lowering interest rates, they aim to stimulate economic growth — making borrowing cheaper, which can encourage spending and investment.
**Interviewer:** The Fed mentioned a unanimous decision on this cut. How important is that consensus among the members?
**Dr. Thompson:** A unanimous decision speaks to the confidence among the board members regarding the current economic situation. It shows that they collectively believe this cut is the right move, reflecting a strong consensus about the need for stimulus as inflation eases and the labor market shifts.
**Interviewer:** They’ve mentioned further cuts may be planned for this year. How do you see that affecting consumer behavior?
**Dr. Thompson:** If rates continue to fall, we can expect more consumers to take out loans for big-ticket items like homes and cars, which could drive economic activity. Additionally, businesses may feel more inclined to invest in expansion, knowing that borrowing costs are lower. However, it’s crucial that these rate cuts are matched by improvements in economic conditions to truly invigorate spending.
**Interviewer:** The political landscape always plays a role. With President-elect Donald Trump suggesting policies that could widen the budget deficit, what are the implications for future interest rates?
**Dr. Thompson:** That’s a good question. Typically, an increase in the budget deficit can lead to higher interest rates, especially if markets expect the government will need to borrow significantly more. If debt levels increase substantially without corresponding economic growth, this could put upward pressure on interest rates, creating a challenging environment for the Fed as they navigate their monetary policy goals.
**Interviewer:** the Fed’s commitment to maintaining their plans despite political upheaval is notable. What does that say about their focus?
**Dr. Thompson:** It indicates a strong commitment to their dual mandate of promoting maximum employment and stabilizing prices. The Fed operates independently from political influences, and their resolve to stick to their economic strategies showcases their prioritization of long-term economic stability over short-term political pressures.
**Interviewer:** Thank you, Dr. Thompson, for your insights on this pivotal development in US monetary policy.
**Dr. Thompson:** My pleasure, thank you!
