Wednesday 11 December 2019 7:03 pm

Federal Reserve ends cycle of cutting interest rates

The US Federal Reserve left interest rates on hold today, bringing to an end the cutting cycle instigated in July.

The decision came after a booming US jobs report on Friday showed that employment rose by its most in ten months in November. The Fed’s target interest rate will stay at between 1.5 and 1.75 per cent.

Read more: US Federal Reserve lowers rates again but signals it is done cutting

This is considerably lower than the 2.25 and 2.5 per cent at the start of the year following a series of “insurance” cuts to help the economy cope with trade tensions.

In a press conference following the announcement, Fed chairman Jay Powell said: “Our economic outlook remains a favourable one, despite global developments and ongoing risks.

“We believe monetary policy is well positioned to serve the American people by supporting continued economic growth, a strong job market and inflation near our 2 per cent goal.”

The US economy has slowed towards the end of the year, although it remains the strongest in the G7 group of rich democracies.

US GDP grew by 2.1 per cent in the third quarter compared to 3.1 per cent in the first three months of the year.

A report from the US Labor Department, also released today, showed that underlying inflation firmed up last month.

The consumer price index rose 0.3% last month as households paid more for gasoline and electricity, and food prices increased for a third consecutive month.

The decision came just days after the death of former Fed chair Paul Volcker on Sunday, aged 92.

Throughout 2019, the ongoing US-China trade war has generated economic uncertainty and has kept the Fed guessing.

An exchange of escalating retaliatory tariffs between the world’s largest two economies has caused a drop in investment and forced the US manufacturing sector into recession.

Volcker was a towering figure in global finance and is credited with tackling rampant US inflation in the 1980s.

In a statement, Powell paid tribute to his predecessor, saying: “I am deeply saddened by the passing of Paul Volcker.

Read more: Former Federal Reserve chairman Paul Volcker dies aged 92

“He believed there was no higher calling than public service. His life exemplified the highest ideals–integrity, courage, and a commitment to do what was best for all Americans.

“His contributions to the nation left a lasting legacy.”