WASHINGTON—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 high rates that helped tame inflation but also made borrowing painfully expensive for American consumers.
Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington on Wednesday, Sept. 18, 2024.
In a statement and in a news conference with Chair Jerome Powell, the Fed came closer than it has before to declaring victory over inflation. Rate cuts by the Fed should, over time, lead to lower borrowing costs for mortgages, auto loans and credit cards, boosting Americans’ finances and supporting more spending and growth. Homeowners will be able to refinance mortgages at lower rates, saving on monthly payments, and even shift credit card debt to lower-cost personal loans or home equity lines. Businesses may also borrow and invest more. Average mortgage rates have already dropped to an 18-month low of 6.
Powell was pressed at his news conference about whether the Fed’s decision to cut its key rate by an unusually large half-point is an acknowledgement that it waited too long to begin reducing borrowing rates. Powell’s characterization of the economy as fundamentally healthy, with inflation under control and employment stable but likely to benefit from rate cuts was an unspoken rebuttal to Trump’s warnings that an economic disaster is near.
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