WASHINGTON (AP) — No one knows how Tuesday's presidential election will turn out, but the Federal Reserve's move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year.
The presidential contest might still be unresolved when the Fed ends its two-day meeting Thursday afternoon, yet that uncertainty would have no effect on its decision to further reduce its benchmark rate. The Fed's future actions, though, will become more unsettled once a new president and Congress take office in January, particularly if Donald Trump were to win the White House again.
Trump's proposals to impose high tariffs on all imports and launch mass deportations of unauthorized immigrants and his threat to intrude on the Fed's normally independent rate decisions could send inflation surging, economists have said. Higher inflation would, in turn, compel the Fed to slow or stop its rate cuts.
On Thursday, the Fed's policymakers, led by Chair Jerome Powell, are on track to cut their benchmark rate by a quarter-point, to about 4.6%, after having implemented a half-point reduction in September. Economists expect another quarter-point rate cut in December and possibly additional such moves next year. Over time, rate cuts tend to lower the costs of borrowing for consumers and businesses.
The Fed is reducing its rate for a different reason than it usually does: It often cuts rates to boost a sluggish economy and a weak job market by encouraging more borrowing and spending. But the economy is growing briskly, and the unemployment rate is a low 4.1%, the government reported Friday, even with hurricanes and a strike at Boeing having sharply depressed net job growth last month.
Instead, the central bank is lowering rates as part of what Powell has called “a recalibration” to a lower-inflation environment. When inflation spiked to a four-decade high of 9.1% in June 2022, the Fed proceeded to raise rates 11 times — ultimately sending its key rate to about 5.3%, also the highest in four decades.
But in September, year-over-year inflation dropped to 2.4%, barely above the Fed's 2% target and equal to its level in 2018. With inflation having fallen so far, Powell and other Fed officials have said they think high borrowing rates are no longer necessary. High borrowing rates typically restrict growth, particularly in interest-rate-sensitive sectors such as housing and auto sales.
“The restriction was in place because inflation was elevated,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer elevated. The reason for the restriction is gone.”
Fed officials have suggested that their rate cuts would be gradual. But nearly all of them have expressed support for some further reductions.
“For me, the central question is how much and how fast to reduce the target for the (Fed's key) rate, which I believe is currently set at a restrictive level,” Christopher Waller, an influential member of the Fed's Board of Directors, said in a speech last month.
Jonathan Pingle, an economist at Swiss bank UBS, said that Waller's phrasing reflected “unusual confidence and conviction that rates were headed lower."
Next year, the Fed will likely start to wrestle with the question of just how low their benchmark rate should go. Eventually, they may want to set it at a level that neither restricts nor stimulates growth — “neutral” in Fed parlance.
Powell and other Fed officials acknowledge that they don't know exactly where the neutral rate is. In September, the Fed's rate-setting committee estimated that it was 2.9%. Most economists think it's closer to 3% to 3.5%.
The Fed chair said the officials have to assess where neutral is by how the economy responds to rate cuts. For now, most officials are confident that at 4.9%, the Fed's current rate is far above neutral.
Some economists argue, though, that with the economy looking healthy even with high borrowing rates, the Fed doesn't need to ease credit much, if at all. The idea is that they may already be close to the level of interest rates that neither slows nor stimulates the economy.
“If the unemployment rate stays in the low 4's and the economy is still going to grow at 3%, does it matter that the (Fed's) rate is 4.75% to 5%?” said Joe LaVorgna, chief economist at SMBC Nikko Securities, asked. “Why are they cutting now?”
With the Fed's latest meeting coming right after Election Day, Powell will likely field questions at his news conference Thursday about the outcome of the presidential race and how it might affect the economy and inflation. He can be expected to reiterate that the Fed's decisions aren't affected by politics at all.
During Trump's presidency, he imposed tariffs on washing machines, solar panels, steel and a range of goods from China, which President Joe Biden maintained. Though studies show that washing machine prices rose as a result, overall inflation did not rise much.
But Trump is now proposing significantly broader tariffs — essentially, import taxes — that would raise the prices of about 10 times as many goods from overseas.
Many mainstream economists are alarmed by Trump’s latest proposed tariffs, which they say would almost certainly reignite inflation. A report by the Peterson Institute for International Economics concluded that Trump’s main tariff proposals would make inflation 2 percentage points higher next year than it otherwise would have been.
The Fed could be more likely to raise rates in response to tariffs this time, according to economists at Pantheon Macroeconomics, "given that Trump is threatening much bigger increases in tariffs.”
“Accordingly," they wrote, “we will scale back the reduction in the funds rate in our 2025 forecasts if Trump wins.”
FILE - Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, on Sept. 18, 2024. (AP Photo/Ben Curtis, File)
NEW ORLEANS (AP) — The FBI now says the New Orleans truck attacker acted alone in an “act of terrorism” when he drove a pickup truck into a crowd of New Year’s revelers early Wednesday, killing 15 people. The driver had posted videos on social media hours before the carnage saying he was inspired by the Islamic State group and expressing a desire to kill, President Joe Biden said.
The FBI identified the driver as 42-year-old Shamsud-Din Bahar Jabbar.
Officials have not yet released the names of the people killed in the attack, but their families and friends have started sharing their stories. About 30 people were injured.
Here is the latest:
The FBI has received more than 400 tips from the public, some from New Orleans and others from other states, Christopher Raia, deputy assistant director of the FBI’s counter-terrorism division, said at a news conference on Thursday.
U.S. President Joe Biden said Wednesday evening the FBI was looking into whether an explosion outside a Las Vegas hotel owned by President-elect Donald Trump was connected to the New Orleans attack.
Fireworks and camp fuel canisters were found in a Tesla Cybertruck that blew up outside the Trump International Hotel early Wednesday, killing a suspect inside the vehicle.
The person who died in the explosion was an active-duty U.S. Army soldier who spent time at the base formerly known as Fort Bragg, three U.S. officials told The Associated Press on Thursday. The officials also spoke on the condition of anonymity because they were not authorized to disclose details of his service.
The truck explosion came hours after a driver, 42-year-old Shamsud-Din Bahar Jabbar, rammed a truck into a crowd in New Orleans. Jabbar, a U.S. Army veteran, also spent time at Fort Bragg, a massive Army base in North Carolina that is home to Army special forces command. An official told the AP that there is no apparent overlap in their assignments there.
The investigation so far has not shown the incidents are related, and authorities don’t think the men knew each other, two law enforcement officials said. The officials were not authorized to discuss details of the investigation publicly and spoke on condition of anonymity.
▶ Read more about the Las Vegas Cybertruck explosion
The FBI says it recovered the black banner of the Islamic State group from the truck that smashed into New Year’s partygoers. The investigation is expected to look in part at any support or inspiration that driver Shamsud-Din Jabbar may have drawn from that violent Middle East-based group or from any of at least 19 affiliated groups around the world.
Routed from its self-proclaimed caliphate in Syria and Iraq by a U.S. military-led coalition more than five years ago, IS has focused on seizing territory in the Middle East more than on staging massive al-Qaida-style attacks on the West.
But in its home territory, IS has welcomed any chance to behead Americans and other foreigners who come within its reach. The main group at peak strength claimed a handful of coordinated operations targeting the West, including a 2015 Paris plot that killed 130 people. It has had success, although abated in recent years, in inspiring people around the world who are drawn to its ideology to carry out ghastly attacks on innocent civilians.
▶ Read more about IS and what attacks it has inspired
Louisiana Governor Jeff Landry will be joined at the news conference by officials from the FBI, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Attorney’s Office, the Louisiana State Police and the New Orleans Police Department.
The conference is scheduled to begin around 10:15 a.m. CST.
“The Superdome is completely secure,” Louisiana Gov. Jeff Landry said on Fox News. “Again, the FBI continues to pour resources into the state.”
Landry said he plans to attend Thursday afternoon’s college football playoff game between the University of Georgia and the University of Notre Dame.
“We need not let fear paralyze us,” Landry added. “That’s the problem in this country. When we do that, the terrorists win.”
ROME — A telegram of condolences, addressed to Archbishop Gregory Aymond, said Francis was saddened to learn of the attack in New Orleans and was spiritually close to the city.
Francis “prays for healing and consolation of the injured and bereaved,” said the telegram, which was signed by the Vatican secretary of state, Cardinal Pietro Parolin.
Separately, Italian President Sergio Mattarella also sent condolences to President Joe Biden, whom he will see during Biden’s visit to Rome next week, saying all of Italy was mourning the loss of life.
“At this time of sorrow for the American people, I would like to reaffirm the firm resolve of the Italian Republic to oppose in the strongest terms all forms of terrorism, on the basis of those values of civilization, democracy and respect for human life that have always been shared with the United States,” he said in a statement.
The College Football Playoff quarterfinal at the Sugar Bowl between Georgia and Notre Dame was postponed by a day because of the truck attack, which unfolded about a mile away.
The game, originally scheduled for 7:45 p.m. CST at the 70,000-seat Superdome on Wednesday, was pushed back to 3 p.m. Thursday. The winner advances to the Jan. 9 Orange Bowl against Penn State.
“Public safety is paramount,” Sugar Bowl CEO Jeff Hundley said at a media briefing alongside federal, state and local officials, including Louisiana Gov. Jeff Landry and New Orleans Mayor LaToya Cantrell. “All parties all agree that it’s in the best interest of everybody and public safety that we postpone the game.”
The decision to postpone the game meant numerous traveling fans with tickets would not be able to attend. Ticket prices online plummeted in some cases to less than $25 as fans with plans to depart on Thursday tried to unload them.
The Superdome was on lockdown for security sweeps on Wednesday morning. Both teams spent most of the day in their hotels, holding meetings in ballrooms.
▶ Read more about the decision to postpone the Sugar Bowl
Officials have not yet released the names of the 15 people killed in the New Orleans New Year’s Day truck attack, but their families and friends have started sharing their stories.
Here’s a look at some of what we know:
▶ Read more about the victims of the New Orleans truck attack
Authorities say the driver of a pickup truck sped through a crowd of pedestrians gathered in New Orleans’ bustling French Quarter district early on New Year’s Day, killing at least 15 people and injuring about 30 others. The suspect was killed in a shootout with police.
The FBI is investigating the attack as an act of terrorism and said it does not believe the driver acted alone.
Wednesday’s attack unfolded on Bourbon Street, known worldwide as one of the largest destinations for New Year’s Eve parties. Large crowds had also gathered in the city ahead of the College Football Playoff quarterfinal at the Sugar Bowl, which had been scheduled for later Wednesday at the nearby Superdome. The game was postponed until Thursday afternoon following the attack.
▶ Catch up on what we know about the New Orleans truck attack
EDS NOTE: GRAPHIC CONTENT - Emergency personnel work the scene on Bourbon Street after a vehicle drove into a crowd on New Orleans' Canal and Bourbon Street, Wednesday Jan. 1, 2025. (AP Photo/Gerald Herbert)
The FBI investigates the area on Orleans St and Bourbon Street by St. Louis Cathedral in the French Quarter where a suspicious package was detonated after a person drove a truck into a crowd earlier on Bourbon Street on Wednesday, Jan. 1, 2025. (AP Photo/Matthew Hinton)
Matthias Hauswirth of New Orleans prays on the street near the scene where a vehicle drove into a crowd on New Orleans' Canal and Bourbon streets, Wednesday, Jan. 1, 2025. (AP Photo/George Walker IV)
A bouquet of flowers stands at the intersection of Bourbon Street and Canal Street during the investigation after a pickup truck rammed into a crowd of revelers early on New Year's Day, Wednesday, Jan. 1, 2025, in New Orleans. (AP Photo/Matthew Hinton)
An officer walks along Conti Street after a vehicle drove into a crowd on New Orleans' Canal and Bourbon streets, Wednesday, Jan. 1, 2025. (AP Photo/George Walker IV)
Law enforcement officers stand behind a SWAT vehicle near a location in Houston, Texas, Wednesday, Jan. 1, 2025, where police personnel investigate the place suspected to be associated with an attacker in a deadly rampage in New Orleans. (Brett Coomer/Houston Chronicle via AP)
Investigators work the scene after a person drove a vehicle into a crowd earlier on Canal and Bourbon Street in New Orleans, Wednesday, Jan. 1, 2025. (AP Photo/Gerald Herbert)
Neighbors stand and watch outside the police lines surrounding a location in Houston, Texas, Wednesday, Jan. 1, 2025, where police personnel investigate the place suspected to be associated with an attacker in a deadly rampage in New Orleans. (Brett Coomer/Houston Chronicle via AP)
Police officers stand near the scene where a vehicle drove into a crowd on New Orleans' Canal and Bourbon streets, Wednesday, Jan. 1, 2025. (AP Photo/George Walker IV)
Neighbors embrace as they stand outside the police lines surrounding a location in Houston, Texas, Wednesday, Jan. 1, 2025, where police personnel investigate the place suspected to be associated with an attacker in a deadly rampage in New Orleans. (Brett Coomer/Houston Chronicle via AP)
