7 months ago
57
The News
The US Federal Reserve slashed interest rates by half of a percentage point on Wednesday, signaling that the central bank wanted to act more boldly to keep the labor market from slowing too much. Recent jobs data has rattled investors and had some economists questioning whether the Fed waited too long to begin cutting rates and overshot its hoped-for soft landing.
Traders had anticipated the bigger half-point cut ahead of the meeting, according to CME’s FedWatch. Sentiment shifted among economists from a more modest quarter-point trim through the beginning of this month to a half-point cut after weaker-than-expected jobs data raised concerns about an economic slowdown.
“We don’t think we’re behind,” Fed chair Jerome Powell said at a press conference following the announcement. “We think this is timely, but I think you can take this as a sign not to get behind.”
The Fed has raised rates 11 times since March 2022, holding the federal funds rate steady at between 5.25% and 5.5% since August 2023, in an effort to tame rising inflation — which has dropped from a recent high of 9.1% in June 2022 to 2.5% last month, nearing the central bank’s 2% target. Wednesday’s cut is the first since March 2020, when the economy collapsed due to the pandemic. After pumping trillions in pandemic-era stimulus funds into the economy that caused consumer prices to soar, the Fed has tried to guide it to a so-called soft landing — where inflation cools without stoking unemployment.
“We are not on any preset course,” Powell said about future rate cuts. “We will continue to make our decisions meeting by meeting.”
