Federal Reserve announces interest rate cut

Fed cuts interest rates by 50 basis points to start easing cycle

The U.S. Federal Reserve announced on the 18th that it would lower the target range of the federal funds rate by 50 basis points to a level between 4.75% and 5.00%. This is the first interest rate cut by the Federal Reserve since March 2020, and also marks a shift from a tightening cycle of monetary policy to an easing cycle.

The Federal Reserve concluded its two-day monetary policy meeting today. The Federal Open Market Committee, the policy-making body of the Federal Reserve, issued a statement after the meeting on the 18th, saying that the committee has "greater confidence" that the inflation rate can sustainably move towards the 2% target, and believes that achieving full employment and price stability are two major issues. The target's risk is roughly balanced

At a press conference after the meeting, Fed Chairman Powell called the 50 basis point interest rate cut a "strong action" and said that the Federal Open Market Committee did not believe that the interest rate cut was slow, but that it was a timely move.

Powell noted that the personal consumption expenditures price index had fallen to 2.2% in August from a high of around 7%, indicating that inflation had "easing significantly." The latest economic outlook released by the Federal Reserve that day showed that Fed officials’ median forecast for the personal consumption expenditures price index at the end of this year fell to 2.3%, down from 2.6% in June.

The decline in inflation comes amid some signs of weakness in the U.S. job market. Powell said monthly job growth has averaged 116,000 over the past three months, which is significantly slower than earlier this year. At the same time, the unemployment rate rose to 4.2%. According to the latest economic outlook, Fed officials' median forecast for the unemployment rate at the end of this year is 4.4%, up from 4.0% in June, which means that labor market conditions are not as good as previously expected.

In addition, the economic outlook also shows that 19 members of the Federal Open Market Committee expect the Federal Reserve to further cut interest rates before the end of this year, with 9 expected to cut interest rates by 50 basis points and 7 expected to cut interest rates by 25 basis points.

With inflation falling less quickly than expected, the Fed has kept the federal funds rate target range at 5.25% to 5.5% since the end of July last year, the highest level in 23 years. In recent months, as U.S. inflation has further eased and the job market has shown signs of weakness, the Federal Reserve has faced pressure to shift policy.$BTC $ETH