The Federal Reserve on Wednesday released its decision regarding interest rates.
WASHINGTON – The Federal Reserve on Wednesday enacted its first interest rate cut since the early days of the Covid pandemic, slicing half a percentage point off benchmark rates in an effort to head off a slowdown in the labor market.
In addition to this reduction, the committee indicated through its"dot plot" the equivalent of 50 more basis points cut by the end of the year, close to market pricing. The matrix of individual officials' expectations pointed to another full percentage point in cuts by the end of 2025 and a half-point in 2026. In all, the dot plot shows the benchmark rate coming down about 2 percentage points beyond Wednesday's move.
In assessing the state of the economy, the committee judged that"job gains have slowed and the unemployment rate has moved up but remains low." FOMC officials raised their expected unemployment rate this year to 4.4%, from the 4% projection at the last update in June, and lowered the inflation outlook to 2.3% from 2.6% previous. On core inflation, the committee took down its projection to 2.6%, a 0.2 percentage point reduction from June.
At his press conference following the July meeting, Powell remarked that a 50 basis point cut was"not something we're thinking about right now." Investors' conviction on the move vacillated in the days leading up to the meeting. Over the past week, the odds had shifted to a half-point cut, at 63% for 50 basis points just prior to the decision coming down, according to the CME Group's FedWatch gauge.
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