With inflation easing, the Federal Reserve announced a 50 basis point cut to its benchmark interest rate on Wednesday — the first reduction in borrowing costs since March 2020.
The central bank’s federal funds rate is now in a range of 4.75% to 5%, which will give Americans a break on their monthly credit card, personal loan, auto financing and mortgage costs.
Prior to Wednesday’s cut, the Fed had implemented 11 consecutive rate hikes over the past two years in an effort to tame inflation, which peaked at a year-over-year rate of 9.1% in June 2022.
While the current inflation rate of 2.5% is still below the Fed’s 2% target, the central bank is confident that price growth is on a sustained downward path.
The decision was also made in part because of the slowing job market. Since high borrowing costs discourage business investment, it can lead to decreased hiring. The Fed’s dual mandate is to both keep inflation low and maximize sustainable employment.
“The upside risks to inflation …