The Federal Reserve announced on Wednesday that it is lowering its interest rate by 50 basis points or half a percentage point. Additionally, the Fed signaled intention that two more cuts will come before the end of 2024.
The Federal Open Market Committee (FOMC) was widely expected to make cuts on Wednesday, with the traders being split on whether the rate will be lowered by 25 basis points or 50 basis points. Both moves had their pros and cons according to experts, with lower cuts threatening to increase the risk of recession while deeper cuts possibly contributed to higher inflation.
In the end, the monetary policymakers opted for a more aggressive approach, bringing the rate to the 4.75%-5% range, although the decision wasn’t unanimous. Fed governor Michelle Bowman dissented, arguing that a 25 basis points cut would be more appropriate.
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Fed said in a statement released after the meeting.
The Fed also shared a so-called dot plot, which indicates that another 50 basis points cut is coming by the end of the year, further full percentage points of cuts in 2025, and a half percentage point cut in 2026. This would bring the interest rate to 2.9%.
Still, it isn’t guaranteed that this will be the approach that the Federal Reserve ends up taking.
“I think we’re going to go carefully meeting by meeting, and make our decisions as we go,” Fed chair Jerome Powell said during press conference after the meeting.