The day that the economy has long awaited has finally arrived as the US Federal Reserve has opted to cut interest rates by 50 basis points in a monumental development. The move is a massive moment for the US economy, as it sees the Central Bank cut rates for the first time in four years.
The decision came after a two-year-long tightening campaign was implemented to continue fighting stubborn inflation rates. Although those figures had yet to retreat to the 2% target, the headway made regarding inflation had empowered the Fed to finally institute a rate cut. Now, all eyes are on how the economy will respond to the long-awaited development.
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Federal Reserve Cuts Interest Rates For the First Time in 4 Years
For much of the last month, all eyes were on the Federal Reserve’s September meeting. Specifically, it was viewed as the date that would see the Central Bank finally loosen its efforts to fend off nagging inflation. Now, the Fed has made good on that anticipation and taken the necessary action.
Indeed, the Federal Reserve has opted to cut interest rates by 50bps in a move that will bring massive relief. It will lower borrowing costs and aim to induce the soft landing the Fed has been hoping for. That pursuit is what drove the Fed to start raising rates aggressively in 2022.
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This is likely to be the first in a series of rate cuts. Moreover, that effort is expected by many to continue into 2025. There certainly shouldn’t be anything standing in the Central Bank’s way. During a recent speech in Jackson Hole, Wyoming, Fed Chair Jerome Powell expressed confidence that inflation had been overcome.
The data had fallen from a 9.1% high in 2022 to 2.5% at the most recent Consumer Price Index Data (CPI). The journey to today’s cuts saw the Fed raise interest rates a remarkable 11 times in the last two years. That led to interest rates reaching a 23-year high prior to the cuts implemented today.
With the 2024 presidential election arriving in November, it certainly is an important time. The US economy has long been marred in a state of fragility. With the fight to bring inflation back to the Fed’s 2% target, now was certainly the time to take action. Luckily, the Fed agreed, making the crucial decision at its most recent FOMC meeting.
