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Federal Reserve System Announced on Wednesday The Fed announced it would cut the federal funds rate by 0.5 percentage points, or 50 basis points, the first rate cut since 2010. 4+ years.
The previous interest rate range set by the Federal Reserve was 5.25% to 5.5%. Best That’s the highest it’s been in more than 20 years. Currently, the range is between 4.75% and 5%.
The announcement was made following a meeting of the Federal Open Market Committee. Upcoming meetings Throughout the year. There are two more meetings scheduled for 2024, in November and December, where the Fed may cut interest rates further.
“The Committee has increasing confidence that inflation is moving sustainably toward 2 percent and judges that the risks to achieving its employment and inflation objectives are roughly balanced,” the FOMC said. press release “In considering further adjustments to the target range for the federal funds rate, the Committee will carefully assess available data, evolving expectations, and the balance of risks,” it said.
Federal Reserve Chairman Jerome Powell. Photo by Natalie Behring/Bloomberg via Getty Images
Economists had predicted the move: EY chief economist Gregory Daco told Entrepreneur last month that the question isn’t whether the Fed will cut the federal funds rate in September, but how much.
He reiterated a prediction made by EY senior economist Lydia Boussour to Entrepreneur magazine: three rate cuts of at least 25 basis points (0.25 percentage points) each in September, November and December.
Related: CPI Report: Inflation at 3-year low, analysts predict Fed to cut rates next month
in A speech given in Jackson Hole, Wyoming in AugustFederal Reserve Chairman Jerome Powell Cuts were predicted In light of the cooling labor market, he said, “The time has come to adjust policy.”
“The Fed is lagging behind, but Chairman Powell is trying to catch up,” Daco said.
How does the Fed’s decision affect you?
The Federal Reserve adjusts the federal funds rate — the borrowing interest rate that banks charge each other — in response to inflation and unemployment across the country. target It’s about stabilizing prices and responding to the labor market.
Related: August jobs report didn’t live up to expectations — what this means for interest rates
The federal funds rate influences the borrowing costs consumers pay for credit cards, personal loans and car purchases. BankrateFor adjustable rate loans, interest rate adjustments usually occur within one or two billing cycles.
The mortgage is only partially Affected by the cutThe two tend to coincide. On Wednesday, interest rates 6.15% – lowest in two yearsBased on economic conditions and government bond yields, Mortgage interest rates It will continue to decline.
Banks individually choose how to respond to interest rate cuts or increases.
Federal tax rates also affect purchasing power, the job market, and the stock market.
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