The U.S. Federal Reserve has cut interest rates by 50 basis points, amid cooling inflation and a weakening labor market.
This is a bolder move than many experts and media had previously anticipated.
Some have criticised the Fed, arguing that it was too slow to implement a rate cut.
Starting in March 2022, the Fed hiked rates 11 times in a row to combat inflation, raising the target range for the federal funds rate to between 5.25 percent and 5.5 percent, the highest level in more than two decades.
After maintaining high interest rates for more than a year, the Fed’s restrictive monetary policy was under pressure to pivot due to diminishing inflationary pressures, evidence of job market weakness, and slowing economic growth.
Many view the Fed’s decision as the beginning of a cycle of rate cuts.
Dean Baker, a senior economist at the Center for Economic and Policy Research, says he expects another cut in the next Fed meeting, a view shared by other economists.
A rate cut could help the U.S. economy, especially by boosting home sales and driving economic activity, said experts.
Rate cuts could also help the U.S. stock market, according to experts.
The Fed’s rate cut was met with optimism in mid-afternoon trading on Wall Street, although gains were erased by day’s end.
Rate reductions could also be a boon to real estate stocks, as that could reduce costs for home buyers.
The Fed’s announcement made less than 10 weeks before the presidential elections, comes amid a neck-and-neck race for the White House.
Former President Donald Trump, the Republican presidential nominee, has said any move ahead of November would be political.
However, experts also noted that Trump and Vice President Kamala Harris, the Democratic nominee, could interpret the Fed’s move in different ways.
