Federal Reserve Chairman Jerome Powell. (Photo by Andrew Harnik/Getty Images)
The US Federal Reserve cut its key lending rate by half a percentage-point Wednesday in its first reduction since the pandemic, sharply lowering borrowing costs shortly before November’s presidential election.
Policymakers voted 11-to-1 in favor of lowering the US central bank’s benchmark lending rate to between 4.75 percent and 5.00 percent, the Fed announced in a statement.
They also penciled in an additional half-point of cuts before the end of this year, and an added percentage point of cuts in 2025.
The Fed’s decision will affect the rates at which commercial banks lend to consumers and businesses, bringing down the cost of borrowing on everything from mortgages to credit cards less than two months before the US presidential election.
The Fed said its rate-setting committee “has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
The central bank has a dual mandate from Congress to act independently to tackle both inflation and employment.
In updated economic forecasts published alongside the Fed’s rate decision, policymakers’ median forecasts pointed to an unemployment rate of 4.4 percent, on average, in the fourth quarter of this year, up from 4.0 percent in the last update in June.
Officials also penciled in an annual headline inflation rate of 2.3 percent, slightly lower than in June.
