Fed lowers interest rates by half point in first cut since 2020

The Federal Reserve slashed interest rates by a half percentage point Wednesday and charted a course for two additional cuts this year followed by four more in 2025.

The action marks the Fed’s first easing of monetary policy since 2020 and the termination of its most aggressive inflation-fighting campaign since the 1980s.

The decision came in a split vote at the conclusion of the Fed’s two-day policy meeting as officials cut the central bank’s benchmark rate by 50 basis points to a new range of 4.75%-5.0%.

Rates had previously been held at a 23-year high since July 2023.

There was some division on the final decision, with Fed governor Michelle Bowman dissenting. She preferred to cut rates by 25 basis points instead of 50.

No Fed official has voted against a policy decision in two years, matching one of the longest such streaks in the past half century. Moreover, no Fed governor has dissented on a rate decision since 2005.

The consensus among Fed officials at today’s meeting was that they now see two more 25 basis point cuts this year, followed by four more cuts next year and two more cuts in 2026.

Nine officials saw 4 cuts this year, seven saw three cuts, 2 officials saw two cuts this year and one saw 5 cuts this year.

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