Key Points:
Read more: Fed Chair Powell Excites Markets With Latest Rate Cut Signal
The move places Fed interest rates in a range of 4.75% to 5%, a move consistent with market expectations, which had been betting on a larger-than-usual borrowing cost cut. In a way, the move is seen as the first in a series of rate cuts targeted at supporting economic stability.
This half-percentage-point cut is remarkable because it’s the biggest reduction outside of emergency measures since the 2008 global financial crisis. As a matter of fact, the last time that such cuts took place was during the COVID-19 pandemic. The Federal Open Market Committee explained this change in monetary policy by underlining that inflation was weakening and job growth was decelerating.
The Fed’s projection showed further cuts, with Fed interest rates expected to decline another 50 basis points by the end of this year and another 100 basis points in 2025. A final cut is forecasted in 2026, which would place Fed interest rates between 2.75% and 3.00%. Based on the median projections provided by Fed members, the rate could decline to 4.4% by the end of 2024, reflecting more cuts in future meetings.
Fed Chair Jerome Powell described the rate cut on Wednesday as “recalibration” in a news conference. He pointed out that even though economic growth is ongoing, risks to inflation are reduced, while concerns regarding employment have risen.
Bitcoin convincingly rose above $61,000 and even briefly reached as high as $61,800 in response to the Fed’s move.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing. |
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