All eyes have been on the Federal Reserve as it prepares for its most consequential interest rate decision in years. This Wednesday, the fed has announced that they have made a significant policy move. Finally, announcing the first interest rate cut in years as inflation shows signs of easing.
In a bid to support economic growth while maintaining stable price levels. The central bank reduced its benchmark rate by an unusually large half-percentage point, to between 4.75 and 5 percent. Four more cuts can be expected in 2025 and two in 2026.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said in a report. “Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress.”
This decision has come after months of holding rates steady. The fed had been focused on taming persistent inflation. With inflationary pressures starting to ease, policymakers have opted to pivot toward more accommodating measures to prevent a potential slowdown in economic growth.
Additionally, the rate cut is expected to lower borrowing costs for consumers and businesses. Potentially providing relief in sectors such as housing, which has been hit by high mortgage rates.
However, Federal Reserve Chair, Jerome Powell, emphasized that the central bank remains vigilant and could adjust rates again if inflation resurges. Even though the market reaction is positive, economist still warns to be prepared for anything. Global uncertainties and domestic economic factors will continue to play a crucial role in these policy decisions.
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