US cuts interest rate by 0.25%p after September big cut

The U.S. Federal Reserve (Fed) cut its benchmark interest rate by 0.25 percentage points on Thursday (local time), continuing expansionary monetary policy after a big cut in September (0.5 percentage points). Fed’s Chair Jerome Powell made it clear that he would not step down even if U.S. President-elect Donald Trump called for his resignation.

“Recent indicators suggest that economic activity continues to expand at a solid pace,” the Fed said in a statement on Thursday. It also explained its reasoning for cutting the rate by adding that the risks to achieving its dual mandate of maximum employment and price stability are believed to be mostly balanced.

On Wall Street, the Standard & Poor’s 500 and Nasdaq Composite hit record highs on Thursday after the Fed cut rates as scheduled and Powell dismissed the possibility of resigning despite Trump’s election win.

The gap between South Korean and U.S. interest rates narrowed to 1.5 percentage points. However, analysts say it will be difficult for the Bank of Korea to reduce its rates further because of the strong dollar brought on by the election results. “It is difficult to rule out the possibility that volatility in the foreign exchange and financial markets may increase depending on the policy details of Trump’s second term administration,” the Bank of Korea’s Senior Deputy Governor Ryoo Sang-dai said, warning at a meeting to review market conditions.


이동훈 기자 dhlee@donga.com