Fed cuts interest rates a half point in landmark policy shift

(NEW YORK) — Tech billionaire Elon Musk has kept busy since Election Day, advising President-elect Donald Trump and receiving an appointment to co-lead a new government efficiency commission.

Musk has also found time to promote Trump in scores of posts on the social media platform X, formerly Twitter, which he owns. But such advocacy appears to have driven some X users to seek alternatives.

One such app, Bluesky, has drawn attention as a possible X rival and has amassed a total of 20 million users to date. Its growth accelerated in the aftermath of the election, when Bluesky added one million users in a single week.

Launched by former Twitter CEO Jack Dorsey, Bluesky has attracted some prominent users in recent days, including comedian Ben Stiller, author Stephen King, and pop star Lizzo.

Here’s what to know about Bluesky, and how to join:

What is Bluesky?

Bluesky is a text-oriented social media platform on which users can post messages as long as 300 characters. Like X, the messages posted on Bluesky appear on a newsfeed displayed to users. The app is available on iOS and Android.

The platform operates on an open framework, meaning that users can post their messages to a server tailored for specific interests or communities. The system design resembles that which is used on another text-first app, Mastodon, as well as the decentralized platform Discord.

Bluesky began in 2019 as a venture at Twitter overseen by Dorsey, and was launched as an independent company in 2022, the year after he left Twitter.

Development of the site started after a 2020 tweet from Dorsey announcing Twitter’s plans to fund a decentralized social media platform, Bluesky said in a blog post. The eventual leaders at Bluesky were among those who sent direct messages to Dorsey in response to his post, the blog added.

Who owns Bluesky?

The board of directors at Bluesky features Dorsey as well as Jeremie Miller, the founder in the late 1990s of a free instant messaging service called Jabber.

Bluesky’s CEO is Jay Graber, who formerly founded an events-oriented social media site called Happening and worked as a software engineer on a cryptocurrency called Zcash, according to LinkedIn. She also serves on the Bluesky board.

The company is owned by Graber as well as “the Bluesky team,” the Bluesky website says.

While Bluesky has retained a traditional corporate structure featuring a board and chief executive, the company said it aspires to take control of content away from a top-down entity and return it to creators.

“Traditional social networks are often closed platforms with a central authority,” the website says. “There’s a small group of people who control those companies, and they have total control over how users can use the platform and what developers can build.”

Dorsey criticized Musk’s leadership at Twitter on Bluesky last year, saying that things “all went south” at the platform after Musk’s acquisition, CNBC reported.

Is Bluesky a viable alternative to X?

The steady growth of Bluesky has made it a destination for an increasing number of celebrities, elected officials and government entities. But the platform remains much smaller than X or the Meta-owned competitor, Threads.

Bluesky boasts roughly 20 million users, which amounts to less than 10% of the 229 million daily active users disclosed by Twitter in a June 2022 earnings report. X’s user data is no longer publicly available since Musk took the company private.

In July, Meta CEO Mark Zuckerberg announced that Threads had exceeded 175 million monthly active users.

How do you join Bluesky?

During Bluesky’s initial years, users could only join the platform if they received an invitation. The policy aimed to limit the app’s user base as it underwent testing.

In February, however, the platform made itself available to all users. Individuals or organizations can navigate to the platform and follow instructions to create an account.

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(NEW YORK) — Americans’ credit card debt has hit a record high, the Federal Reserve of New York said in a report released this week.

Credit card debt climbed $24 billion over a three-month stretch ending in September, soaring to a level 8% higher than where it stood a year ago, the report said.

Debt holders may seek solace in a string of recent interest rate cuts at the Federal Reserve, which typically reduce borrowing rates for credit cards. But credit card interest rates have proven stubborn, leaving borrowers saddled with near record-high average payments even after the rate cuts.

The average credit card interest rate stands at 20.35%, just slightly below a record-high of 20.79% attained in August before the Fed began cutting rates, Bankrate data showed.

Credit card interest rates remain high, in part, because the Fed’s benchmark rate still stands at a historically high level, experts told ABC News. The incremental cuts in recent months have only partially reversed the previous escalation of rates meant to fight the nation’s worst bout of inflation in decades.

That high baseline rate has collided with a rise in the average credit card margin, or the borrowing cost that companies place on top of the benchmark rate to weather default risk, cover overhead costs and recoup profits, experts added.

“Credit card rates are high, and they’re staying high,” Ted Rossman, a senior industry analyst at Bankrate, told ABC News.

To set credit card interest rates, the industry relies on what’s called a “prime rate,” which is the rate paid by the most creditworthy borrowers. That rate is calculated by adding three percentage points to the Fed’s benchmark interest rate. The prime rate, which acts as a baseline for credit card rates faced by all borrowers, currently stands at 7.75%.

The prime rate remains historically high because the Fed has, so far, taken just a few, incremental steps toward dialing back a yearslong series of rate hikes. In recent months, the Fed has cut interest rates by three-quarters of a percentage point, but such relief offers little savings for credit card borrowers, experts said.

Policymakers at the Fed forecast another quarter-point cut next month, and cuts next year totaling one percentage point, but that will still leave interest rates at an elevated level, according to projections released in September.

“I don’t think the Fed wants a rapid fall in rates,” John Sedunov, a finance professor at Villanova University’s School of Business, told ABC News. “It wants to gradually ease rates back.”

The persistence of high interest rates has coincided with a rise in the margin charged by credit companies over and above the prime rate, some experts said.

The average margin charged by credit card firms reached an all-time high of 14.3% last year, according to a U.S. Consumer Financial Protection Bureau analysis of Federal Reserve data. The margin increased sharply from a rate of 9.3% in 2013, the CFPB found.

The rise in credit card delinquency owes, in part, to a decline in personal savings, as Americans have spent down pandemic-era economic stimulus and turned to credit card loans, Sedunov said.

“Banks may view the amount of risk in credit card lending as higher than it was a few years ago, even though the Fed is lowering rates,” Sedunov said.

Growth in credit card margins also stems from old-fashioned profit-taking on the part of credit card companies, some experts said.

Credit card profitability has increased over the past five years, and has outpaced the profitability of other business drivers at the companies that offer them, according to the CFPB report.

“Banks, especially large banks, are trying to make as much profit as they can,” Fariz Huseynov, a professor of corporate finance at North Dakota State University, told ABC News.

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(NEW YORK) — A surging stock market, low unemployment and robust growth — by just about every measure, the economy stood poised to deliver victory for Vice President Kamala Harris.

The exception, of course, was inflation, and it appears to have overshadowed other indicators. More than two-thirds of voters say the economy is in bad shape, according to the preliminary results of an ABC News exit poll.

Inflation likely shaped negative voter perceptions of the economy and helped fuel anger toward the party in power, just as it has done across the globe since the pandemic unleashed a wave of rapid price increases, experts told ABC News.

The political potency of inflation stems from the visceral, recurring sense of unease caused by high prices, experts added. That feeling leaves voters insecure about their future and desperate for a leader who can change the nation’s course.

“Inflation has a specific and special power in elections,” Chris Jackson, senior vice president of public affairs for Ipsos in the U.S., told ABC News. “It’s something people see in their face every day — every time they go to the grocery store or fill up their car.”

He added, “Inflation is present in people’s lives. It’s something they’re unhappy with and it’s something they rightly or wrongly blame on whoever is in charge.”

The pandemic set off an acute bout of inflation that impacted nearly every country across the world, when global supply chain blockages caused an imbalance between the availability of goods and the demand for them. In other words, too much money chased too few products.

Prices began to rise rapidly in the U.S. in 2021, catapulting the inflation rate to a peak of about 9% the following year. Inflation soared even higher in many other countries, including the likes of Brazil and England, where leaders faced an angry electorate.

In Brazil, where President Jair Bolsonaro cut taxes on fuel and electricity in an effort to slash prices over the months preceding an election that concluded in October 2022, the nation nevertheless replaced him with a leftwing challenger.

Earlier that year, in England, Prime Minister Liz Truss responded to the highest inflation in four decades with an economic policy centered on tax cuts and energy price controls. Her tenure in office lasted just 44 days before market reaction and political disarray led to her stepping down.

The post-pandemic pattern has exemplified a high rate of leadership change amid inflation crises around the world over the last half century, according to a study by Eurasia Group, a political risk consultancy firm. Examining 57 inflation shocks since 1970, the firm found government turnover in 58% of cases.

Further, when there was an election during or within two years of an inflation shock, it led to a change in government in roughly three out of every four instances, according to Eurasia Group.

“We’re seeing this trend on jet fuel after the pandemic,” said Robert Kahn, the managing director of global macro-geoeconomics at the New York-based Eurasia Group. “The pandemic inflation shock contributes to a sense of instability and a loss of confidence among people in their governments.”

Carola Binder, an economics professor at the University of Texas at Austin who studies the history of inflation in the U.S., characterized recent anti-incumbent sentiment in a slightly different way: “When people are experiencing inflation and suffering from it, they want to have someone or something to blame.”

Inflation has cooled dramatically over the past two years, now hovering near the Federal Reserve’s target rate of 2%. Even so, that progress hasn’t reversed a leap in prices that dates back to the pandemic. Since President Joe Biden took office in 2021, consumer prices have skyrocketed more than 20%.

The potential role of inflation in the U.S. election owes to a typical lag between when inflation comes down and when consumers acclimate to new price levels, since a lower inflation rate does not mean prices have come down but rather that they have begun to increase at a slower pace, experts told ABC News.

“When inflation comes back down, the prices of many critical items remain high, especially for people who are stretched and living paycheck to paycheck,” Kahn said.

Consumers will likely acclimate to current price levels over the coming months, but voters will remain sensitive to inflation, experts said.

President-elect Donald Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants risk rekindling rapid price increases, some experts said.

When asked about whether inflation could reemerge as an important issue ahead of the next midterm elections in 2026, Jackson said: “If Republicans shoot themselves in the foot, absolutely.”

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