U.S. Fed slashes interest rates by 50 basis points

After a gap of four years, the United States Federal Reserve has slashed interest rates as part of a broader strategy to ease monetary policy amid concerns about the job market. The Fed also mentioned the risks to employment, inflation goals were in balance.

This reduction will affect various consumer products, including mortgages, auto loans, and credit cards.

The Fed reduced the interest rates by 50 basis points, bringing the federal funds rate to a range of 4.75%-5%.

The Fed's committee also signaled further cuts, with an additional 50 basis points expected by the end of the year. Projections indicate another full percentage point cut by the end of 2025 and a half-point cut in 2026, totaling a 2 percentage point reduction beyond the latest move.

Policymakers expressed confidence that inflation is moving towards the 2% target, balancing the risks to employment and inflation goals. However, Governor Michelle Bowman dissented, preferring a smaller quarter-point cut.

The Fed's benchmark rate is anticipated to fall to a range of 2.75%-3.00% by 2026, reflecting a slight increase in the longer-run neutral rate. Despite inflation remaining somewhat elevated, the Fed justified the rate cut based on progress in inflation and risk balance. The Fed remains ready to adjust monetary policy as needed to achieve its goals of stable prices and maximum employment.