The Fed is poised to cut rates — and the timing is undeniably awkward

For over 70 years, the US central bank has operated as an independent government agency. When officials meet to decide where interest rates should be, they don’t consult the president and other elected officials — and for good reason.

That’s because, as one former Federal Reserve chair famously said, central bankers’ job is to remove the punchbowl right when the party is just getting started. Said differently, they have to make unpopular decisions that ultimately seek to benefit the economy in the long run.

But the Fed’s independence could be compromised once President-elect Donald Trump returns to the White House.

“I feel the president should have at least a say in there. I feel that strongly,” Trump said at a press conference in August, referring to the Fed’s interest rate decisions. “I made a lot of money. I was very successful. And I think I have a better instinct than, in many cases, people that would be on the Federal Reserve — or the chairman.”

It’s unclear if Trump, or any president, could take the Fed’s independence away on his own or if it would require congressional approval. Representatives from the Trump campaign did not respond to CNN’s request for a comment, while a Fed spokesperson declined to comment.

After a barrage of backlash, Trump sought to soften his prior comments. “A president certainly can be talking about interest rates because I think I have very good instincts,” Trump said in a Bloomberg News interview less than two weeks after he claimed he deserved a say. “That doesn’t mean I’m calling the shot, but it does mean that I should have a right to be able to talk about it like anybody else.”

Read more here.

A trader works at the New York Stock Exchange, at the end of the trading day, after Republican presidential nominee Donald Trump became U.S. president-elect, in New York City, on November 6.

US stocks opened with a small gain Thursday ahead of a key policy announcement from the Federal Reserve.

The Dow rose by just 0.07%, the S&P rose by 0.4% and the Nasdaq Composite gained 0.7%.

Thursday’s moves come after a monster rally Wednesday, prompted by President-elect Donald Trump’s return to the White House.

First-time claims for jobless benefits ticked higher as expected last week but remained steady with what’s been seen over the past year; however, Americans are staying unemployed for longer, according to new data released Thursday.

There were 221,000 initial claims for unemployment insurance made during the week ended November 2, the Department of Labor reported Thursday. Those filings are up by 3,000 from the upwardly revised tally the week before.

The initial claims — considered a proxy for layoffs — hit economists’ expectations on the nose, according to FactSet estimates.

While the first-time claims settled down as anticipated after a brief stint of being pushed upward by hurricane-affected workers, the number of continuing claims, which are filed by people who have received unemployment insurance for at least a week or more, moved higher by 39,000 to 1.892 million for the week ended October 26.

That’s the highest level of continuing claims since November 2021.

The US jobs market has been cooling. The pullback in job growth has been attributed more to employers reining in hiring versus conducting layoffs.

Shopper pushes a basket into the produce section of a Walmart store on October 22 in Englewood, Colorado.

Federal Reserve officials are dealing with something of an economic puzzle as they deliberate their latest decision on interest rates.

There are signs of a robust economy, such as American shoppers continuing to spend their dollars at a healthy clip and consumer confidence jumping in October at the fastest pace in more than three years. In addition to strong consumer spending — which accounts for about two-thirds of the US economy — businesses have also continued to invest, according to recent government data.

But there are also signs of slowing momentum: Job openings, a proxy for labor demand, fell in September back to pre-pandemic levels. The October jobs report was difficult to assess because of the effects of recent hurricanes and labor strikes on data, but it still came in far below expectations that factored in those disruptions.

And on the inflation front, price pressures have continued to ease in recent months, though not quite as much as economists expected. It’s unclear if inflation might stall out or finally reach the Fed’s 2% target, which is only a hair away, according to the Personal Consumption Expenditures price index, aka the Fed’s favorite gauge of inflation.

President-elect Donald Trump points to the crowd at his election watch party in West Palm Beach, Florida, on November 6.

To promote his economic platform of broad-brush tariffs and tax cuts, President-elect Donald Trump is expected to lean on longtime allies and loyalists, while tapping into Wall Street heavyweights to round out his domestic agencies.

There are several names being batted around for Treasury secretary. They include Scott Bessent, who prepared Trump for his economic club speeches.

“He’s a former Soros guy who captured the MAGA movement. The president loves that, former Democrats that he’s flipped. That’s why he loves Elon [Musk] so much,” said a source familiar with the matter.

John Paulson, a hedge fund billionaire and megadonor, is also under consideration. Jay Clayton, a former chair of the Securities and Exchange Commission, is seen as a “dark horse,” according to one source.

Lighthizer has also expressed interest in the Treasury post. Both Bob Lighthizer, Trump’s former US trade representative, and Linda McMahon are also under consideration to run the Commerce Department.

North Dakota Gov. Doug Burgum, who was a finalist to be Trump’s vice-presidential pick, is being floated as interior secretary.

At the Office of the US Trade Representative — a once-sleepy outfit across the street from the White House — the Trump team is looking for someone who wouldn’t flinch at his often mercurial whims on tariff policy. Jamieson Greer, who served as Lighthizer’s deputy when Trump instituted across-the-board tariffs on adversaries and allies alike, is the name sources raise most often for this role.

Read more here.

People pass the New York Stock Exchange in New York's Financial District on November 5.

Stock futures were higher in the US ahead of the Federal Reserve rate decision, set to be released at 2 pm ET. Futures on the Dow and S&P were up around 0.2% and Nasdaq futures gained by 0.3%.

Markets had rocketed higher Wednesday following President Donald Trump’s decisive and consequential victory in the US presidential election.

The massive rally pushed up the Dow by 1,507 points, or 3.57%, to close at a new record high. It’s the first time the blue-chip index has gained more than 1,000 points in a single day since November 2022.

The S&P 500 and Nasdaq also reached new highs the morning Trump became president elect, with the S&P surging by 2.5% and the tech-heavy index closing 2.95% higher. The US dollar had its best day in two years, bitcoin topped $76,000 and Treasury yields also rose.

Bank of England Governor Andrew Bailey (C) speaks during the central bank's Monetary Policy Report press conference at the Bank of England, in London, on November 7.

The Bank of England cut interest rates by a quarter point Thursday, after inflation in the United Kingdom fell to a three-year low in September.

The decision takes the UK’s benchmark interest rate to 4.75% from 5%, where it had stood since August, after the first rate cut since the start of the pandemic.

“The disinflationary process has progressed well and indeed faster than we expected,” Bank of England Governor Andrew Bailey told reporters.

“Both oil and gas prices have been significantly lower than market pricing suggested a year ago, but the downside news to inflation over the year has also reflected lower than expected food, core goods and services price inflation,” he added.

UK inflation slowed to 1.7% in September, from 2.2% in August, falling below the Bank of England’s 2% target to its lowest level since April 2021.

Bailey cautioned, however, that interest rates would need to “remain restrictive for sufficiently long” until risks to inflation, including strong wage growth and the price of some services, have “dissipated further.”

“We need to ensure inflation stays low. So we will not cut rates too quickly or too much,” the Bank of England said.

The Federal Reserve is expected to announce Thursday it is cutting interest rates, a decision that comes just two days after a divisive and historic US presidential election.

The central bank is widely expected to cut rates by a quarter point at the conclusion of its two-day policy meeting. The widely expected move comes as inflation remains on a downward trend.

Investors will be listening closely Thursday afternoon to comments from Fed Chair Jerome Powell at his traditional post-meeting press conference for any clues on the pace of future rate cuts, given the policies touted by former President Donald Trump, who is poised to return to the White House for a second term.

A statue of an eagle is seen on the Federal Reserve building on September 17 in Washington, DC.

The Federal Reserve has eight scheduled two-day monetary policy meetings every year. One of those meetings takes place in November and, coincidentally, kicked off the Wednesday directly right after Election Day.

As Fed Chair Jerome Powell has previously vowed, officials don’t take the political calendar into consideration when they make interest rate decisions. Rather, it’s always about doing what’s best for the economy, Powell’s said.

Still, this meeting’s proximity to Election Day has put the Fed in an uncomfortable position — whether Powell and his colleagues want to admit it or not.

Already, officials have been scrutinized for their decision to begin lowering rates at its last meeting before the election, which took place in September. The concern has been that the Fed could have inadvertently helped out Democrats by lowering borrowing costs for Americans, potentially leaving some feeling better about the state of the economy as they prepared to cast votes.

But even though this month’s meeting comes after the election, it could still appear as though central bankers are giving an assist to one political party over another.

For instance, if the Fed scales down the size of its rate cut — or doesn’t cut rates at all — it could, once again, give some people the impression that officials wanted to improve the election outcome for Democrats by getting in a larger-than-usual cut at the September meeting instead of waiting to do so at this month’s meeting.