The US Federal Reserve has decided to cut interest rates by half a percentage point. It is the first such cut since the early days of the pandemic four and a half years ago.
The decision was announced on Wednesday at the Fed’s regular policy meeting.
Policymakers had been keeping the interest rate above 5 percent for more than a year to battle inflation, as consumers struggle with rising costs. The approach managed to cool prices, which led to the decision to lower the benchmark rate.
At a news conference following the meeting, Fed Chair Jerome Powell said: “We know that reducing policy restraint too quickly could hinder progress on inflation.
At the same time, reducing restraint too slowly could unduly weaken economic activity and employment.”
The US unemployment rate has edged up, and high mortgage rates discourage people from buying homes.
So the Fed decided to move aggressively in the belief that lower borrowing costs will encourage investment and protect against a slowdown.