WASHINGTON: The Federal Reserve has cut interest rates for the first time in four years after concluding its two-day policy meeting on September 18.
Monetary policymakers kicked off their first easing campaign since the onset of the COVID-19 pandemic by lowering the benchmark federal funds rate by 50 basis points, to a range of between 4.75 per cent and 5 per cent. The decision affects interest rates on credit cards, auto loans, mortgages, and other financial products, as well as savings accounts.
The central bank’s decision to drastically lower interest rates just ahead of November’s presidential election is expected to draw some criticism.
Trump’s stand
Former President Donald Trump, for example, told Bloomberg in May that the Fed’s move to lower rates is “something that they know they shouldn’t be doing” so close to an election. However, investors had widely expected that the central bank would start the new cycle in an aggressive manner.
“The committee has gained greater confidence that inflation is moving sustainably toward 2 per cent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the post-meeting statement from the Federal Open Market Committee (FOMC) reads. “The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals.”
Fed Chair Jerome Powell is not declaring victory on inflation just yet, because the primary focus still is keeping inflation stable and preventing the unemployment rate from climbing higher.
