2024-09-19 08:24:23
The US Federal Reserve Board announced on its website that it is lowering the Federal Funds Rate (the target interest rate at which commercial banks in the US grant and receive overnight loans and deposits – note ed.) to a range of 4 .75-5 per cent. This is a decrease of 50 basis points or 0.5 percentage points compared to the previous 5.25-5.50 percent, writes BTA.
The decision to cut rates did not come as a surprise to markets and analysts, but the step was larger than most had expected.
After a two-day meeting, the Fed announced on its website that the latest macroeconomic data showed that “economic activity continues to expand at a substantial pace. Job growth has slowed and the unemployment rate has risen but remains low. Inflation has made further progress towards target of 2 percent, but remains somewhat elevated.
The IMF has gained “greater confidence that inflation is moving sustainably towards 2 percent and assesses that the risks to achieving the employment and inflation targets are roughly balanced.”
The monetary institution adds that due to the presence of risks “in considering further adjustments to the target range of the key interest rate”, incoming data and changing perspectives will be carefully monitored.
The decision was taken by a majority of 11 votes to 1.
In addition, the Federal Reserve indicated that it may cut interest rates again by the end of the year.
This is the first rate cut in the US since March 2020, when the COVID-19 pandemic was announced. Interest rates were then lowered to near zero to support the economy. CBBC described the move as an aggressive start to a campaign to ease monetary policy.
However, low interest rates and problems related to supply chains after the end of the acute phase of the pandemic led to a rise in inflation, which prompted the IMF to start tightening its monetary policy.
The rate hike began in March 2022 amid inflation that hit its highest level since the 1980s in June of that year.
The tightening of monetary policy peaked in July 2023, when the Fed last raised interest rates to a 22-year high of 5.25-5.50 percent.