The US Federal Reserve has reduced its benchmark interest rate by 50 basis points, bringing it down to a range of 4.75% to 5%. This is the first rate cut in four years, signaling the start of a new easing cycle.
The Federal Reserve had kept its policy rate between 5.25% and 5.50% since July 2023 due to rising inflation, which reached a 40-year high. However, inflation is now nearing the central bank's target, prompting the decision to lower rates.
In its statement on September 18, 2024, the Federal Open Market Committee (FOMC) outlined its current stance on monetary policy:
"Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has increased slightly but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated."
The FOMC emphasized its goals of maximum employment and stable inflation at 2% over the long term. The committee expressed increased confidence that inflation is moving steadily toward this target. It also noted that risks to achieving its dual mandate—full employment and stable inflation—are now more balanced. Despite this progress, the economic outlook remains uncertain, and the committee is closely monitoring potential risks.
Given the advancements in inflation control and the balanced risk outlook, the committee decided to lower the federal funds rate target by 50 basis points. The FOMC will continue to assess economic data and may make further adjustments based on evolving conditions. It also reiterated its commitment to reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities.
The FOMC stated that it remains focused on supporting maximum employment and bringing inflation back to the 2% objective. The committee will continue to monitor the implications of new data and be ready to adjust policy if risks arise that could hinder its goals.
During the vote, most committee members supported the rate cut, including Chair Jerome H. Powell and Vice Chair John C. Williams. However, Michelle W. Bowman voted against the action, favoring a smaller reduction of 25 basis points.
Will the Fed’s Rate Cut Signal a New Economic Era? Key Insights from September’s Meeting
New Foreign Exchange Rules 2024 Aim to Simplify Investments and Boost Ease of Doing Business
