Fed expresses readiness to cut rates for 1st time in over 4 years
Date
9/18/2024 5:36:53 AM
(MENAFN) The Federal Reserve is on the brink of making a significant move on Wednesday by cutting its benchmark interest rate for the first time in over four years. This anticipated decision, which comes just weeks before the presidential election, could reduce borrowing costs for both consumers and businesses. However, there's uncertainty surrounding the magnitude of the cut. While some Wall Street traders and economists predict a more substantial half-point reduction, others expect a more conservative quarter-point decrease.
The Fed's shift in focus from managing inflation to supporting a weakening job market reflects its aim to achieve a "soft landing" — a scenario where inflation is controlled without triggering a severe recession. With inflation now only slightly above the Fed's target level, a half-point rate cut could demonstrate the central bank's commitment to fostering economic growth. This move is anticipated to be the start of a series of rate cuts extending into 2025, aimed at further stimulating the economy.
The backdrop of this decision is a period of high interest rates and elevated prices for essential goods, which have contributed to public dissatisfaction and provided ammunition for political campaigns. Former President Donald Trump has criticized the current economic conditions, while Vice President Kamala Harris has countered that Trump's proposed tariffs would exacerbate consumer costs.
Rate cuts by the Fed are expected to reduce borrowing costs across various sectors, including mortgages, auto loans, and business financing. This reduction could spur business investment and boost stock market performance, as companies and consumers take advantage of lower interest rates to refinance existing debt. Fed Chair Jerome Powell has indicated confidence in the central bank's success in curbing inflation, which has dropped significantly from a peak of 9.1 percent in June 2022 to 2.5 percent last month. The slowdown in wage growth and falling energy prices further support the outlook for continued inflation moderation.
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