The Federal Reserve cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates helped tame…
The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing. Coming just weeks before the presidential election, the Fed’s move also has the potential to scramble the economic landscape just as Americans prepare to vote.
The central bank’s officials fought against high inflation by raising their key rate 11 times in 2022 and 2023. Wage growth has since slowed, removing a potential source of inflationary pressure. And oil and gas prices are falling, a sign that inflation should continue to cool in the months ahead. Consumers are also nearly a full percentage point from its half-century low in April 2023 to a still-low 4.2%. Once unemployment rises that much, it tends to keep climbing.
At issue in the Fed’s deliberations is how fast it wants to lower its benchmark rate to a point where it’s no longer acting as a brake on the economy — nor as an accelerant. Where that so-called “neutral” level falls isn’t clear, though many analysts peg it at 3% to 3.5%.
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