The Federal Reserve (Fed) has cut interest rates by 50 basis points amid rising concerns over the U.S. job market and softer-than-expected inflation.
Fed Rate Cut: Key Points
The Fed cut interest rates to a range of 4.75% to 5%, consistent with market expectations, which were betting on a larger-than-usual borrowing cost cut. This half-percentage-point cut is the biggest reduction outside of emergency measures since the COVID-19 pandemic. The Federal Open Market Committee (FOMC) noted that inflation is weakening and job growth is decelerating.
Market and Bitcoin Reaction
In response to the Fed's move, Bitcoin surged significantly, rising above $61,000 and briefly reaching up to $61,800. The rate cut also signaled to the market that further reductions are possible, reflected in the cryptocurrency's price increase.
Fed’s Future Projections
According to Fed projections, further rate cuts of another 50 basis points are expected by the end of this year and an additional 100 basis points in 2025. By 2026, rates could be reduced to a range of 2.75% to 3%. Median projections by Fed members suggest rates could decline to 4.4% by the end of 2024, reflecting longer-term plans to stabilize the economic situation.
The recent Fed rate cut signifies substantial changes in U.S. economic policy. Continued rate reductions highlight the seriousness of the economic challenges faced by the country and the Fed’s commitment to supporting economic stability.
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