US Federal Reserve slashes interest rates by half a point, first cut in 4 years
Central bank’s aggressive move follows a gradual reduction in US inflation and comes less than two months before election day
The US Federal Reserve announced an interest rate cut of half a percentage point on Wednesday, the first downward adjustment in four years and a move that follows a slow but steady decline in America’s inflation rate.
The Federal Open Market Committee said the aggressive reduction was made “in light of the progress on inflation and the balance of risks”.
“Job gains have slowed, and the unemployment rate has moved up but remains low,” the Fed said in its announcement. “Inflation has made further progress toward the committee’s 2 per cent objective but remains somewhat elevated.”
The committee projected that the jobless rate would stand at 4.4 per cent by the end of the year, up from 4.2 per cent now, a range that Federal Reserve chief Jerome Powell said was “very healthy”.
“We were used to seeing numbers in the mid, and even below the mid-threes last year,” he said. “But if you look back over the sweep of the years … that’s a very healthy unemployment rate. And anything in the low fours is a really good labour market.”
“Vacancies per unemployed is back to what is still a very strong level,” Powell added. “It’s not as high as it was. That number reached … two vacancies for every unemployed person as measured. It’s now below around one, but that’s still a very good number.”
