In a significant move, the U.S. Federal Reserve has reduced its key interest rate by 0.5%, bringing the federal funds rate down to a range of 4.75-5.00%. This decision marks the first rate cut since 2020 and comes in response to cooling inflation and signs of a softer labor market.
The Fed’s decision reflects its strategy to prevent an economic slowdown while ensuring inflation continues to move toward the target of 2%. With job gains slowing and inflation decelerating, the central bank aims to stimulate economic activity without reigniting inflation.
Fed Chair Jerome Powell emphasized the importance of maintaining stability, noting that while inflation has eased, more action is needed to sustain progress. The larger-than-expected rate cut is designed to boost demand and support job growth, signaling the Fed’s strong commitment to balancing growth and price stability.
As interest rates fall, consumers and businesses may see more favorable borrowing conditions, which could lead to increased spending and investment. However, Powell cautioned that the Fed is not yet signaling a series of large rate cuts in future meetings, and any future changes will depend on economic data.
Visit FederalReserve.gov for the full FOMC statement.