In September, the Federal Reserve Bank (“Fed”) cut interest rates by a quarter of a percentage point. After a campaign from President Trump to influence the independent bank, the rate cut marked the first substantial policy change in the U.S. central bank since December 18, 2024 by Fed Chair Jerome H. Powell, who is known for his data-driven approach and has been holding interest rates at a steady range of 4.25% to 4.5%. Citing a “risk management” move in the maintenance of balancing unemployment and inflation, Powell reflected that the Fed is tackling the complex task of ensuring the rise in consumer prices does not culminate into persistent inflation issues in future.
On the other hand, the Federal Reserve Bank confirmed that it would take a more proactive stance, although officials remain divided about the bank’s future policy. Two Trump appointees on the Board of Governors expressed concerns about the U.S. labor market while other officials, including voters like Chicago’s Fed President Austan Goolsbee, raised issues of rising inflation, which was 2.9% in August – up from its 2% inflation goal. Additionally, experts saw that the Fed’s dual mandate of stable prices and maximum employment are under pressure due to the new U.S. tariff policy that is pushing up some prices in addition to the massive budget cuts.
Asian markets fluctuated after the rate cut, with stocks in Singapore like the Straits Times Index dipping by 0.14%. Generally, despite this shift in policy, the Fed is likely to remain cautious in its future approach. The rate of returns on yields for firms imply a suitable time to strengthen their portfolio protection by considering assets like gold and increasing capital investment. More attracting cost of borrowing may also provide opportunities for firms to consider strategic acquisitions or reinvestment.
