Fed officials kicked off rate cuts with a half-point reduction, confident that inflation is cooling and eager to keep the job market strong.
The Federal Reserve cut interest rates on Wednesday by half a percentage point, an unusually large move and a clear signal that central bankers think they are winning their war against inflation and are turning their attention to protecting the job market.
“Our patient approach over the past year has paid dividends,” Jerome H. Powell, the Fed chair, said during his news conference. But now “the upside risks to inflation have diminished, and the downside risks to unemployment have increased.”
The Fed’s decision lowers rates to about 4.9 percent, down from a more than two-decade high.
The pivot comes in response to months of fading inflation, and it is meant to prevent the economy from slowing so much that the job market begins to weaken more painfully. Officials have been keeping a careful eye on a recent uptick in the unemployment rate, and by starting off with a big cut, the Fed is in effect taking out insurance against a bigger employment slowdown.
Reinforcing that cautious message, the decisive reduction came alongside economic projections that suggested a more rapid pace of rate cuts than officials had envisioned just a few months ago. Officials now expect to make another half-point reduction before the end of the year.
“We’re going to take it meeting by meeting,” Mr. Powell said. “We made a good, strong start to this, and that is frankly a sign of our confidence, confidence that inflation is coming down.”
Where Fed Officials Expect Rates Will Be
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Actual
target rate
Latest
projections
6
%
5
4
Each dot represents what one Fed official thinks the target rate should be at the end of this year and the next.
3
2
1
0
’21
’22
’23
’24
’25
Actual
target rate
Latest
projections
6
%
5
4
Each dot represents what one Fed official thinks the target rate should be at the end of this year and the next.
3
2
1
0
’21
’22
’23
’24
’25
Cheaper Mortgages and Car Loans: Lower Rates Are on the Horizon
With the Federal Reserve lowering interest rates, some borrowing costs have begun to ease — signs that loans may become cheaper in the near future.
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Source: Economy - nytimes.com
