The Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, a day after Donald Trump returned as US president.

Policymakers voted unanimously to cut the Federal Reserve's key interest rate to 4.50% to 4.75%, the Fed said in a statement

The Fed said its decision was in response to the decline in once-high inflation, which is now approaching the central bank's 2 percent target. He also pointed to the improvement in the labor market.

This is the second rate cut in a row and reflects the Fed's renewed focus on supporting the labor market and combating inflation.

What did the Fed say?

In a statement, the Fed said that “the unemployment rate has increased but is still low,” while inflation has fallen closer to the central bank's target but is “still somewhat elevated.”

“Economic activity continued to grow at a solid pace,” the central bank’s FOMC, which sets interest rates, said at the end of a two-day policy meeting.

The election of Donald Trump has also raised the specter of White House interference in the Fed's policy decisions.

Trump has said that as president he wants a say in the central bank's interest rate decisions, while the Fed has long maintained its role as an independent central bank and kept any political interference at bay.

During Trump's previous term, he publicly attacked Fed Chairman Jerome Powell, whom he first appointed to lead the U.S. central bank, for raising interest rates to combat inflation.

ft/rmt (AFP, Reuters)