Federal Reserve set to make interest rate decision days after election of Trump

The Federal Reserve on Thursday will announce its latest decision on the direction of interest rates, setting the path for borrowing costs just two days after the victory of President-Elect Donald Trump.

The Fed cut its benchmark interest rate a half of a percentage point in September, dialing back its yearslong fight against inflation and delivering relief for borrowers saddled with high costs.

The Federal Open Market Committee (FOMC), a policymaking body at the Fed, has forecast further interest rate cuts.

By the end of 2024, interest rates will fall another half of a percentage point from their current level of between 4.75% and 5%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections further indicated.

The central bank is widely expected to cut interest rates by another quarter of a percentage point when it meets on Thursday, according to the CME FedWatch Tool, a measure of market sentiment.

In recent months, the U.S. has inched closer to a "soft landing," in which inflation returns to normal and the economy averts a recession.

Government data released last week showed robust economic growth over a recent three-month period, alongside a continued cooldown of inflation.

U.S. hiring slowed in October, but fallout from hurricanes and labor strikes likely caused an undercount of the nation's workers, U.S. Bureau of Labor Statistics data on Friday showed.

Since 2021, the Fed has sought to rein in inflation with elevated interest rates. Even after the Federal Reserve cut its benchmark interest in September, it still stands at a historically high level.

Inflation has cooled dramatically from a peak of about 9% in 2022, hovering right near the Federal Reserve’s target rate of 2%.

The trajectory of inflation could shift in the coming months. Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants are widely expected to raise consumer prices, experts previously told ABC News.

To be sure, the Fed says it bases its decisions on economic conditions and operates as an independent government body.

When asked previously about the 2024 election at a press conference in Washington, D.C., in December, Powell said, "We don't think about politics."

The election of Trump appears to have delivered a boost for the stock market. The U.S. stock market soared at the open of trading on Wednesday, just hours after Trump declared victory.

The Dow Jones Industrial Average climbed more than 1,300 points, amounting to a nearly 3% rise in the index. The S&P 500 and the tech-heavy Nasdaq each jumped more than 2%.

Shares of Tesla, the electric vehicle company headed by Trump ally Elon Musk, spiked about 14.5% in early trading on Wednesday.