US Federal Reserve Cuts Interest Rates by 50 Basis Points: Key Highlights from Jerome Powell and the FOMC

The US Federal Reserve (Fed), under the leadership of Chair Jerome Powell, announced a significant interest rate reduction of 50 basis points (bps) on Wednesday. This is the first rate cut since 2020, bringing the Fed’s benchmark interest rate to a range of 4.75% to 5%.

This decision aims to make borrowing more affordable for businesses and consumers, lowering the cost of loans such as home and auto loans, which will likely stimulate economic activity.

Jerome Powell on the Economic Outlook

During the Federal Open Market Committee (FOMC) press conference, Chair Jerome Powell stated that the US economy remains robust. “The economy is expanding at a steady pace, inflation is decreasing, and the job market remains strong. Our goal is to maintain these positive trends,” Powell remarked.

Impact of the Rate Cut

By reducing the interest rates, the Fed has effectively lowered the borrowing cost for banks, which in turn reduces the lending rates for businesses and individuals. This will ease the burden on consumers seeking mortgages, auto loans, and other types of credit, encouraging further spending and investment.

Full US Federal Reserve Statement

According to the FOMC statement, recent indicators show that economic activity continues to grow steadily. Although job gains have slowed and the unemployment rate has slightly increased, it remains low. Inflation has made progress towards the Fed’s 2% target but is still somewhat above that level.

The Committee remains focused on achieving its dual mandate of maximum employment and stable inflation around 2%. The Fed expressed greater confidence in inflation returning to the 2% goal and noted that the risks to achieving its employment and inflation objectives are balanced.

Due to the progress in reducing inflation and balancing risks, the FOMC decided to lower the federal funds rate by 50 bps to a target range of 4.75% to 5%. The Committee will continue to assess incoming data, monitor evolving economic conditions, and evaluate the balance of risks before making any further adjustments.

The Fed also confirmed It will continue reducing its holdings of Treasury securities, agency debt, and mortgage-backed securities. The Committee reiterated its commitment to supporting maximum employment and bringing inflation back to the 2% target.

Future Policy Outlook

The FOMC stated it will continue to closely monitor economic data, including labor market conditions, inflationary pressures, and global developments, to determine the appropriate stance on monetary policy. The Committee stands ready to adjust its policy approach if risks arise that could threaten its objectives.

FOMC Voting Breakdown

Voting in favor of the 50 bps rate cut were Jerome Powell, John C. Williams, Thomas I. Barkin, Michael S. Barr, Raphael W. Bostic, Lisa D. Cook, Mary C. Daly, Beth M. Hammack, Philip N. Jefferson, Adriana D. Kugler, and Christopher J. Waller. Michelle W. Bowman dissented, preferring a smaller 25 bps rate cut at this meeting.