It has set the benchmark rate within a range of 4.75% to 5%. While he has not given any indication of future cuts, he has stressed that he has become “more confident” that inflation is heading towards 2%. Jerome Powell has stated that they will adjust their austerity policies without haste.
The United States Federal Reserve (Fed) announced a half-point interest rate cut on Wednesday, the first decline after a cycle of increases that began in March 2022, when inflation spiraled out of control due to the pandemic and the war in Ukraine. Therefore, the benchmark interest rate It is in a range of 4.75% to 5%.
In the statement issued, the Fed stressed that it “greater confidence” that inflation will move sustainably towards 2%and considers that the risks to achieving the employment and inflation targets are “approximately balanced”, although the country has acknowledged that “the economic outlook is uncertain”.
The economy of the world’s largest power experienced a 3% growth in GDP in the second quarter of 2024, compared to 1.4% in the previous quarter. As for the US labor market, 142,000 non-farm jobs were created in August and unemployment fell by a tenth to 4.2%. To this we must add that the consumer price index (CPI) is at its lowest figure since February 2021; in August it was 2.5% year-on-year.
After the 11 hikes implemented since March 2022 to keep inflation under control, the benchmark interest rate has been between 5.25% and 5.5% since July 2023, the highest figure since January 2001.
The European Central Bank (ECB) and other institutions have been cutting rates for months, but the Fed has been much more conservative so far, saying economic data was not reliable enough.
On this occasion it decided to cut 50 basis points, but has not given any indications of possible drops in the future. The chairman of the institution, Jerome Powellhas stated that the regulatory authority will adjust its policy of austerity without haste and according to the economy. “Decisions will be made, meeting after meeting, until we reach a place that is most suitable.”
Of course, economic forecasts are optimistic, with most forecasts indicating that the year will end with interest rates at 4.4% in the United States (the equivalent of a 4.25% to 4.5% range), reaching 3.4% in 2025 and 2.9% in 2026.
Source: EITB
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
