News Brief
US Federal Reserve Lowers Rates By 50 Basis Points After Four-Year Hiatus — All You Need To Know
US dollar bills (Unsplash/Sharon McCutcheon)
In a significant move, the US Federal Reserve slashed key interest rates by 50 basis points, bringing the rates to a range of 4.75-5 per cent, marking the first reduction in over four years.
This comes after a two-day meeting of the Federal Open Market Committee (FOMC), the primary rate-setting body in the United States.
Addressing the media after the FOMC meeting, Federal Reserve Chair Jerome Powell noted that the US economy remains robust, with signs of a cooling labour market and a considerable reduction in inflationary pressures.
The US federal funds rate now stands in the range of 4.75-5 per cent.
“Our (American) economy is strong overall and has made significant progress towards our goal over the past two years. The labour market has cooled from its formerly overheated state. Inflation has eased substantially from the peak of 7 per cent to an estimated 2.2 per cent in August," Powell stated.
He also said inflation risks have diminished.
This rate cut, the first in four years, is expected to be the beginning of a series of reductions by the Fed, likely continuing through 2025. The last interest rate cut in the US took place on 15 March 2020.
The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities.
The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective, it added.
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the FOMC statement said.
The US central bank held the interest rates steady 11 times for the past one year since July 2023.
Ahead of that, between March 2022 and July 2023, the US central bank had increased rates by a total of 525 basis points in an effort to combat inflation, which had surged to record levels due to factors such as the Ukraine-Russia war and COVID-related disruptions.
