Fed Cuts Rate by 50 Basis Points

After months of caution, the Federal Reserve, the US central bank, broke the delay and announced on September 18 its decision to cut interest rates by 50 basis points. This is the first monetary policy easing since 2020, the largest since 2008 when the United States faced a recession.

“Recent indicators suggest that economic activity continues to grow at a confident pace. Job growth has slowed, the unemployment rate has increased, but remains low. Inflation has moved toward the committee’s 2% target but remains slightly elevated,” the Fed said in a statement. “The committee aims to achieve maximum employment and inflation rate of 2% over the long term. The Committee has gained greater confidence that inflation is steadily approaching 2% and believes that the risks to the employment and inflation targets are roughly balanced.”

The Federal Open Market Committee (FOMC), the Fed’s body that makes monetary policy decisions, also explained that the economic outlook remains uncertain. In any case, given the progress on the inflation front, it was decided to cut the federal funds rate by half a percent, bringing it to 4¾-5%.

“In considering any adjustments to the target range for the federal funds rate, the , committee will carefully evaluate incoming data, the evolving prospect, and the balance of risks notes. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee firmly intents to maintain maximum employment and return inflation to the 2% target.”

Jerome Powell, president of the Federal Reserve, confirmed: “Recent indicators show that economic activity continued to expand at a solid pace, with GDP expanding at an annualized rate of 2.2% in the first half of the year, and available data point to more or less the same pattern of growth rates this quarter.” It was also revealed that new cuts are just around the corner, but not until after the November 5 presidential election.