SUMMARY
The U.S. Federal Reserve implemented a notable half-point reduction in its benchmark interest rate, marking a significant shift after more than two years of high rates designed to control inflation. While these high rates were effective in curbing inflation, they also made borrowing significantly more expensive for American consumers. The decision to cut the rate was not unanimous; Fed Governor Michelle Bowman had argued for a more modest quarter-point reduction.
1 / 7The Federal Reserve has lowered its key interest rate to about 4.8%, down from a peak of 5.3% reached earlier this year. The move follows 11 consecutive rate hikes since the start of 2022 aimed at curbing inflation, which had reached its highest level since 1981 due to pandemic-related disruptions and rising consumer demand. Here are the key quotes from the press conference:
2 / 7On policy recalibration: Federal Reserve Chairman Jerome Powell explained: “This recalibration of our policy stance will help maintain the strength of the economy and labor market, and will continue to allow for further progress on inflation as we begin the process of transitioning to a more neutral stance. We are not following any pre-set path. We will continue to make our decisions meeting by meeting.”
3 / 7On job growth: Powell highlighted the recent slowdown in job creation, saying: “It is clear that wage and salary job creation has slowed in recent months and this bears watching.”
4 / 7On future rate cuts: Powell cautioned against expecting a consistent pattern of rate cuts, saying: “We have waited. And I think that patience has really paid off in the form of confidence that inflation is moving sustainably below 2%, so I think that’s what allows us to make this firm decision today. I don’t think anyone should look at this and say, ‘Oh, this is the new pace.’”
5 / 7On the policy timeline: Powell stressed that the Fed is in no rush to adjust policy, saying: “There is nothing in the SEP (Summary of Economic Projections) to suggest that the committee is in a rush to do so. This process evolves over time.”
6 / 7On economic conditions: Powell assessed the current state of the economy, noting: “The U.S. economy is in good shape. It is growing at a solid pace. Inflation is coming down.”
7 / 7On the decision to cut rates: Powell acknowledged the diversity of opinions within the Fed, noting: “There was a lot of debate, there was also broad support for the decision that the committee voted on. There is dissent and there is a variety of opinions, but there is actually a lot of common ground as well.”
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