Fed Cuts Key US Interest Rate By Half A Point, First Drop In 4 Years

The US Federal Reserve aggressively cut a key interest rate by half a point on Wednesday. The large rate cut is the first time the funds rate has dropped in more than four years.

The Fed also signaled more cuts before the end of the year and rate cuts continuing into 2025.

Fed Chairman Jerome Powell had telegraphed the drop ahead of the announcement. The question that wasn't answered was how large the cut would be.

Some financial experts were expecting a quarter-point drop and others were advocating for the larger half-point drop in the benchmark lending rate.

The Fed rate has been at a 23-year high of between 5.25 and 5.50 percent. It will now sit in a range between 4.75% and 5%.

Inflation has been easing, allowing rate cuts to begin. The U.S. central bank is trying to keep the economy from sinking into a recession as hiring cools.

When the Fed cuts rates, banks generally cut rates on loans to consumers and credit card rates.

That would be a bit of a relief for consumers who had dealt with higher interest rates and inflation for several years.

The Fed, which is supposed to act independently, was trying to not impact the November election.

Its mandate is to set monetary policy to ensure both stable prices and maximum sustainable employment.