The Federal Reserve took a significant step on Wednesday by cutting interest rates by half a percentage point. This decision marks the beginning of an anticipated period of relaxed monetary policy, with the larger-than-usual reduction driven by increasing worries about the job market.
Policymakers have indicated their expectation for further rate cuts, predicting the benchmark rate to decrease by another half percentage point by year-end. The Fed projects further reductions in 2025 and 2026, with the rate ultimately settling in a range of 2.75% to 3.00%.
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While acknowledging that inflation “remains somewhat elevated,” this move emphasizes the progress made in controlling inflation and the need to balance various risks. The Fed has stressed its commitment to adjusting monetary policy as required to fulfill its dual mandate of ensuring stable prices and maximizing employment.
This policy shift marks a potential turning point in the economic landscape, with implications for businesses, consumers, and investors alike. The Fed’s future actions will be closely watched as the economy navigates the challenges of inflation and a changing job market.
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