The Fed decided to cut short-term interest rates by half a percentage point, bringing the federal funds rate down from 5.25% to 4.75%. The goal of this large cut was to boost the economy, which could boost car and home sales as mortgage rates fell below 6%. However, the decision also meant lower interest rates on savings accounts and CD yields, hurting savers and pension funds.

Federal Reserve Chairman Jerome Powell reiterated the Fed’s commitment to a gradual approach to future policy adjustments. During the press conference, Powell addressed concerns about the housing market and inflation, noting that normalizing interest rates will help support the housing market, and that the Fed’s actions are aimed at ensuring price stability over the long term.

Markets responded positively to the rate cut, with small-cap stocks leading the gains. However, Powell indicated that future rate cuts would be smaller unless there was a risk of a recession. The decision seemed bold, especially given that it was made less than two months before the presidential election, but Powell stressed that the Fed’s decisions are based solely on economic conditions, not politics.

For more details, you can read the full press release on the Federal Reserve's website.

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