Federal Reserve Moves Ahead with Highly Anticipated Rate Cut

A recent easing of inflation has prompted decisions by the Federal Open Market Committee (FOMC) to reduce its benchmark interest rate by ½ percentage point — the first reduction in borrowing costs since March 2020. Further prompting the decisions is the slowing job market – partly due to high borrowing costs discouraging business investment which can lead to a decrease in hiring. “After 11 consecutive rate hikes over the past two years,” news of the 50 basis point cut lowers the target range for the federal funds rate to 4-3/4 to 5 percent, with “76% of traders expecting the federal funds rate to fall to a range of 4% to 4.75% by late December according to data from the CME FedWatch tool.” Americans will now benefit from a moderate break on their monthly credit card, personal loan, auto financing and mortgage costs according to the press release by CNBC. Although the August 2024 inflation rate of 2.5% remains above the Fed’s 2.0% target rate, it has lowered significantly from the annual average of 8.0% in 2022; and the “central bank is confident that price growth is on a sustained downward path.” 

Source:    https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm

Source:    https://www.cnbc.com/2024/09/18/federal-reserve-cuts-interest-rates-what-will-get-cheaper.html