The Federal Reserve cut interest rates by 50 basis points to a range of 4.75%-5%, marking the start of a rate-cut cycle aimed at stabilizing the economy after tackling inflation. This is the first rate cut since 2020, following a prolonged period of high rates to curb inflation. The decision wasn't unanimous, as one Fed member preferred a smaller cut.
Fed projections now suggest two more rate cuts in 2024, with the benchmark rate expected to fall to 4.4%. Inflation forecasts for the coming years have been revised downward, with inflation expected to hit the 2% target by 2026. The unemployment rate is projected to rise slightly, but Fed Chair Jerome Powell downplayed recession concerns, citing strong economic growth, cooling inflation, and a solid labor market.
Markets reacted with volatility, but overall, resilient growth and easing monetary policy could support higher prices in the long run.
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