The US Federal Reserve (Fed) has reduced the interest rates by 50 basis points (bps), setting it between 4.75% and 5%.
It points to the Fed’s response to signs of progress in reducing inflation, although the rate remains slightly above its long-term target of 2%.
In its latest statement, the Federal Open Market Committee (FOMC) said the US economy continues to grow at a steady pace.
“We made a good strong start and I am very pleased that we did,” Jerome Powell, Fed Chair said at a press
“The logic of this both from an economic standpoint and from a risk management standpoint was clear.”
However, job gains have slowed, and the unemployment rate has risen slightly, though it remains low by historical standards.
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The Committee expressed increasing confidence that inflation is gradually moving toward its 2% target, while acknowledging that it is still somewhat elevated.
This rate cut implies the Fed’s ongoing effort to balance its dual mandate of promoting maximum employment and ensuring price stability.
While inflation appears to be moderating, the overall US economic outlook remains uncertain. The FOMC indicated that it will continue to monitor incoming economic data to determine whether further adjustments to interest rates are necessary.
The Fed also reiterated its commitment to reducing its balance sheet by trimming holdings of Treasury securities, agency debt, and mortgage-backed securities as part of its broader monetary policy framework.
