The US Federal Reserve is reacting to lower inflation and cutting its key interest rate for the first time since the outbreak of the coronavirus pandemic. The Fed announced that the key interest rate will now be cut by 0.5 percentage points to a range of 4.75 to 5.00 percent.
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- The US Federal Reserve has initiated a change in interest rate policy.
- The key rate will be cut by 0.5 percentage points to a range of 4.75 to 5.00 percent.
- In doing so, the central bank responded to falling inflation and cut its key interest rate for the first time in more than four years.
The US Federal Reserve cut interest rates by 0.50 percentage points. The Fed announced Wednesday in Washington that the key interest rate range will be narrowed to 4.75% to 5.00%.
In doing so, the central bank responded to falling inflation and cut its key interest rate for the first time in more than four years. Commercial banks can borrow money from the central bank at this rate.
This is an unusually high interest rate step. The central bank is also signaling further rate cuts this year.
The change of course towards a looser monetary policy was in itself expected. However, it was unclear whether the central bank of the world’s largest economy would opt for that big jump in interest rates or take the more cautious route and only cut rates by 0.25 percentage points.
The Fed last cut the key interest rate in March 2020 to stimulate the economy at the start of the coronavirus pandemic. After that, interest rates initially remained at zero. Until the Fed began hiking at a record pace in March 2022.
In the US, however, price increases have weakened recently. Inflation eased to 2.5% in August. In 2022, that was sometimes just over 9 percent. However, the rate currently remains above the Fed’s 2% inflation target.
Other central banks w e.g. the European Central Bank (ECB) and the Swiss National Bank (SNB) had already started changing interest rates.
dpa
