The Federal Reserve announced 50 basis point rate cut, marking a significant shift in monetary policy after a year of aggressive interest rate hikes. The cut will bring the federal funds rate down from the current range of 5.25% to 5.5%, the highest level since January 2001.
While there was some disagreement among economists regarding the size of the cut, consensus leaned towards either a 25 or 50 basis-point reduction.
The Fed’s decision to pivot towards a more accommodative monetary policy is largely driven by the continued moderation of inflation, which prompted the initial series of rate hikes.
While the Fed directly controls only the federal funds rate, its rate decisions have a far-reaching impact on borrowing costs throughout the economy. Lenders often set their rates based on the Fed-determined range, and rate cuts will ripple through various aspects of everyday life.
