The US central bank (Fed) cut rates for the first time since 2020, hitting hard with a half-point cut, and considering another half-point by the end of 2024, during the last meeting before the US election on November 5.
This important decision by the Fed comes less than two months before the American election, which will see Democrat Kamala Harris face off against Republican Donald Trump.
Fed rates are now in a range of 4.75 to 5.00%, after spending more than a year at their highest level since the turn of the century, at 5.25 to 5.50%.
The decision was not unanimous at the Federal Open Market Committee (FOMC), with one governor, Michelle Bowman, voting for a cut of only a quarter of a point.
“The Committee gained greater confidence in the sustainable decline in inflation towards 2%“, a target level considered healthy for the economy, the FOMC specified in its press release.
Now that inflation is gradually coming back into line, the Fed wants to prevent unemployment from rising in turn by lowering rates.
And more cuts are on the horizon, as Fed officials have signaled they plan to cut rates further by the end of 2024, by another half-point in total.
Across the Atlantic, the European Central Bank (ECB) cut rates for the second time in three months on Thursday.
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