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SUMMARY
The US Federal Reserve implemented a notable half-point reduction in its benchmark interest rate, marking a significant change after over two years of elevated rates designed to control inflation. While these high rates were effective in curbing inflation, they also made borrowing considerably costly for American consumers. The decision to cut the rate was not unanimous; Fed Governor Michelle Bowman had advocated for a more modest quarter-point reduction instead.
1 / 7The Federal Reserve has reduced its key interest rate to approximately 4.8%, down from a peak of 5.3% earlier this year. This change follows 11 consecutive rate hikes since early 2022, aimed at curbing inflation, which had reached its highest level since 1981 due to pandemic-related disruptions and increased consumer demand. Here are the top quotes from the press conference:
2 / 7On policy recalibration: Fed Chair Jerome Powell explained, “This recalibration of our policy stance will help maintain the strength of the economy and the labour market, and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance. We are not on any preset course. We will continue to make our decisions meeting by meeting.”
3 / 7On job growth: Powell noted the recent slowdown in job creation, stating, “Clearly payroll job creation has moved down over the last few months, and this bears watching.”
4 / 7On future rate cuts: Powell cautioned against expecting a consistent pattern of rate cuts, saying, “We’ve waited. And I think that patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2%, so I think that is what enables us to take this strong move today. I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’”
5 / 7On policy timeline: Powell emphasised that the Fed is not rushing to adjust its policy, stating, “There’s nothing in the SEP (Summary of Economic Projections) that suggests the committee is in a rush to get this done. This process evolves over time.”
6 / 7On economic conditions: Powell assessed the current state of the economy, noting, “The US economy is in good shape. It is growing at a solid pace. Inflation is coming down.”
7 / 7On rate cut decision: Powell acknowledged the range of opinions within the Fed, remarking, “There was a lot of discussion back and forth, there was also broad support for the decision that the committee voted on. There is a dissent, and there’s a range of views, but there’s actually a lot of common ground as well.”
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