US Federal Reserve Cuts Interest Rates by 25 Basis Points

BBC News

Federal Reserve Chair Jerome Powell.

The US Federal Reserve has lowered its benchmark interest rate by 25 basis points, setting the federal funds rate at 4.00% to 4.25%. The move, announced on Wednesday following the Federal Open Market Committee’s (FOMC) meeting, marks the central bank’s first reduction of the year after holding rates steady for five consecutive meetings.

In its statement, the Fed noted that while the US economy continues to expand, growth has slowed in recent months. Employment gains have moderated compared with earlier in the year, and inflation, although easing slightly, remains above the 2 per cent target.

“The Committee seeks to foster maximum employment and inflation at the rate of 2 per cent over the longer run,” the statement said. “In support of these goals, the Committee decided to reduce the target range for the federal funds rate to 4.00 to 4.25 per cent.”

Markets had widely expected the cut, which reflects the Fed’s effort to balance price stability with sustaining economic growth. The decision comes as borrowing costs remain at their highest levels in more than a decade, dampening business investment and consumer spending.

The dollar weakened sharply in the wake of the announcement, while gold prices surged past $3,700 an ounce, reaching record highs. Equity markets also responded positively, with the S&P 500 and Nasdaq both posting gains.

Fed Chair Jerome Powell, speaking at a press conference following the decision, emphasised that the central bank would continue to monitor economic indicators closely and adjust policy as needed. He noted that while inflationary pressures are gradually easing, risks to the outlook remain, particularly from global trade tensions and geopolitical uncertainty.

The cut is expected to provide some relief to households and businesses facing high borrowing costs, though analysts remain divided over whether this marks the beginning of a broader easing cycle.

Sources: The US Federal Reserve, Reuters, and The Guardian


PUKMEDIA