Economic concern over employment: U.S Federal Reserve reduces interest rates
The US Federal Reserve has made a significant move by cutting mortgage rates for the first time in nearly a year and a half. The new mortgage rate range now stands at 4.0 to 4.25 percent, a decrease of 0.25 percentage points. This decision comes amidst a push from President Trump for mortgage rate cuts, but the Fed Board has chosen to act cautiously given the rise in inflation. The employment growth in the 12 months up to March 2025 was revised down by a total of 911,000 jobs, pushing inflation risks related to US tariffs into the background. The rate cut is expected to reduce the attractiveness of the US dollar and strengthen the euro. This move could have implications for the global economy, as a weaker US dollar makes US exports more expensive for foreign buyers. Stephen Miran, a recent interim member of the Fed board, advocated for a larger mortgage rate cut. Miran, who is a Trump ally, has been accused by some, such as Senator Elizabeth Warren, of being 'Trump's puppet'. However, the intense pressure from the White House may not have played a significant role in the current decision. The Fed has hinted at further mortgage rate cuts by the end of the year, with up to two mortgage rate cuts possible. This is good news for businesses and consumers, as lower mortgage rates make loans cheaper. President Trump has stated that he wants to boost the economy, make it easier for Americans to buy homes with lower mortgage rates, and reduce the mortgage burden on the national debt. However, the future independence of the Fed while Trump is president is a question. Trump has initiated the dismissal of Fed Governor Lisa Cook, citing alleged irregularities in private mortgage lending. Cook is fighting back legally against her dismissal and recently won a victory in a U.S. appeals court. The slowing employment growth has had a particular impact on young adults and minorities in the US, who are currently finding it difficult to find jobs. This is a concern for many, as a strong economy relies on a healthy labour market. In conclusion, the US Federal Reserve's decision to cut mortgage rates for the first time in nearly a year and a half could have significant implications for the global economy. While the move is expected to boost the US economy, questions remain about the independence of the Fed and the potential for further mortgage rate cuts.
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