US Federal Reserve cuts key policy rate by 25 basis points

This is the second rate cut in seven weeks

The US Federal Reserve cut the interest rate on federal funds by 25 basis points (bps) to 4.5-4.75% per annum, which was in line with market and analyst expectations. This is stated in the report of the Federal Open Market Committee (FOMC).

This is the second rate cut in the last seven weeks, which launched the first cycle of monetary policy easing by the Fed in the last four years.

“The latest indicators suggest that economic activity continues to grow at a strong pace. Since the beginning of the year, labor market conditions have generally improved, and the unemployment rate has risen but remains low. Inflation has moved closer to the Committee’s 2% target but remains somewhat elevated,” the FOMC said in a statement.

The Committee notes that it seeks to achieve maximum employment and inflation of 2% over the long term and believes that the risks to achieving these goals are roughly balanced, as it said in its September statement.

The economic outlook is uncertain, and the FOMC is attentive to the risks to both sides of its dual mandate (maintaining stable prices and maximizing employment).

As the US central bank’s chairman, Jerome Powell, said during a press conference, the Fed will make further decisions on the base interest rate depending on statistical data. He did not rule out another rate cut in December of this year, nor did he rule out the possibility that the Fed would pause in easing policy at its next meeting.

In September 2024, the US Federal Reserve cut the interest rate on federal funds by 50 basis points (bps) to 4.75-5% per annum. This was the first rate cut since March 2020; until September 18, it was at its highest level in 23 years.