The Federal Reserve, as had been almost universally expected, cut its key interest rate from a 23-year-high on Wednesday, dropping it by half a percentage point in what is likely to be the first in a series of cuts. There had been a lot of speculation over whether the Fed would opt for a quarter-point cut or a half-point cut. Futures trading had suggested a 55% probability of the larger—and bolder—cut, CNBC reports. This is the first rate cut since early in the COVID pandemic. It brings the key rate down to around 4.8% from 5.3%, where it had been for 14 months.
In a statement after its most closely watched decision in years, the central bank said it "has gained greater confidence that inflation is moving sustainably toward 2%." Some analysts suspect the Fed waited too long and it could be too late to avoid a recession, though others warn that inflation could make a comeback, the AP notes. CNN reports that decisions were unanimous at the previous 16 Fed meetings over the last two years, but on Wednesday, one of the 11 officials voted against the majority. Fed Governor Michelle Bowman voted for a quarter-point cut.
The European Central Bank and countries including Canada and the UK have already cut rates, but others have held back, including South Korea and India, out of fears that lowering rates before the Fed does could harm their currencies, the Wall Street Journal reports. This story has been updated with additional details. (More Federal Reserve stories.)
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