WORLD
US Fed slashes policy rate by a larger 50 basis points to keep jobless rate low
- IBJ Bureau
- Sep 20, 2024
The US central bank on Wednesday kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction. Federal Reserve Chair Jerome Powell said that the rate cut was meant to show policymakers’ commitment to sustaining a low unemployment rate, now that inflation had eased.
“We made a good strong start, and I am very pleased that we did,” Mr Powell said at a press conference after the Fed, noting its increased confidence that the country’s bout with high inflation was over, reduced its benchmark policy rate by 50 basis points to the 4.75-5.00 per cent range. “The logic of this both from an economic standpoint and from a risk management standpoint was clear,” he added.
Mr Powell, who has championed policy-by-consensus since becoming Fed chief in 2018, saw the first dissent from a Fed governor since 2005 when Michelle Bowman voted against the decision in favour of a smaller quarter-percentage-point rate cut.
Mr Powell called the move a “recalibration” to account for the sharp decline in inflation since last year; he noted that the economy remained strong, but the central bank wanted to stay ahead and stave off any weakening in the job market. Analysts saw the rate cut as a nod to what has been an overarching aim of Mr Powell to avoid unnecessarily trading higher unemployment to reach the central bank’s 2 per cent inflation target.
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