US Fed Cuts Interest Rates By Half a Point

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Facts

  • The US Federal Reserve on Wednesday cut benchmark interest rates by half a percentage point to the 4.75% to 5% range in the face of softening inflation and a potential slowdown in the labor market.[1][2]
  • This marks the first time the central bank has lowered rates by as much as half a point since 2008, excluding the emergency rate cuts made during the COVID pandemic.[1]
  • From July 2023, interest rates had been at their highest since 2001 at around 5.25% to 5.5% while the Fed waited for inflation to get closer to its 2% goal. After peaking at around 9% two years ago, Inflation slowed to 2.5% from a year earlier this August.[3][4]
  • The Fed also projected four rate cuts in 2025 and two more in 2026, as inflation is predicted to reach 2% by the end of next year.[5]
  • In a statement, the Fed said it has 'gained greater confidence' that inflation is cooling to the 2% goal. The Fed also reiterated its commitment to 'supporting maximum employment' while bringing inflation down.[6][7]
  • Fed Chair Jerome Powell called the rate cut a 'recalibration' of the central bank's policy that will 'maintain the strength of the economy and the labor market.' The Dow Jones, the S&P 500, and the Nasdaq all saw an uptick following the announcement.[4]

Sources: [1]CNBC, [2]Huffington Post, [3]FOX News, [4]ABC News, [5]Politico, [6]Bloomberg and [7]USA Today.

Narratives

  • Democratic narrative, as provided by MSNBC. The Biden-Harris economy is well on its way to a full recovery. The Fed needed to normalize interest rates after their huge fall, and this rate cut will help the economy stick the landing and avoid a recession. This should sway more voters away from former Pres. Donald Trump to VP Kamala Harris.
  • Republican narrative, as provided by Townhall. Aside from the Fed breaking tradition by cutting rates so close to Election Day — possibly influencing its outcome — this giant cut actually shows how poorly the Biden-Harris economy is doing. The economy needed this jolt just to show any sign of life, but it's not enough to help the average American.

Predictions