Note : The Federal Reserve cut
its benchmark interest rate by
an unusually large half-percentage
point on Wednesday, a sharp
departure from more than two
years of high interest rates that
have helped curb inflation but
made borrowing more expensive
for American consumers.
The central bank’s first interest
rate cut in more than four years
reflects that the labor market
is once again showing clear
signs of slowing down to
improve the situation. As
Americans prepare to vote a few weeks before the presidential election
the Fed’s move could upset the economic situation.
Watch Jerome Powell’s remarks in the player above.
The central bank’s decision reduced the benchmark interest rate to around 4.8 percent from
a two-decade high of 5.3 percent, 14 months after it battled the worst inflation in the past four decades.
Inflation fell to a three-year low of 2.5 percent in August from 9.1 percent
in mid-2022, which is well below the central bank’s 2 percent target.
At their last two meetings held in November and December of this year, the central bank decision-makers indicated that they would further reduce the benchmark interest rates
by half a percentage point. And four more rate cuts are planned in 2025 and two in 2026.
But overall, Fed policymakers expect that after years of strong job
growth, employers will slow hiring and the unemployment rate will reach its lowest level in half a century by 2023. Point March. When the unemployment rate rises this high, the trend is upward.
At the same time, officials and many economists say the rise in the unemployment rate is due primarily to an influx of people looking for work, particularly new immigrants and recent college graduates, rather than layoffs.
Rubera Farooqi, chief U.S. economist at High Frequency Economics, said the Fed’s current focus is on “maintaining the health of the labor market and eliminating unnecessary impacts on the economy from a relatively hawkish (interest rate) stance.”
