The US Federal Reserve announced its sixth policy decision for 2024 on September 18 after a two-day Federal Open Market Committee (FOMC) meeting and slashed the benchmark interest rate by 50 basis points (bps) to 4.75 per cent-5 per cent for the first time in four years, in line with Wall Street estimates.
Federal Reserve Chair Jerome Powell addressed the current state of the U.S. economy and outlined the Fed’s recent monetary policy decisions. He emphasized the Fed’s commitment to its dual mandate of maintaining maximum employment and stable prices.
Key points include:
- Interest Rate Cut: The Federal Open Market Committee (FOMC) decided to reduce the federal funds rate by 1/2 percentage point, bringing it to a target range of 4.75% to 5%. This move reflects confidence in maintaining a strong labor market while reducing inflation toward the 2% goal.
- Inflation Control: Inflation has eased significantly from its peak of 7% to 2.2% as of August 2024, indicating substantial progress. The Fed’s policy aims to sustain this trend.
- Economic Growth: The economy continues to expand at a solid pace, with GDP growth of 2.2% in the first half of the year. The labor market has cooled, with job gains averaging 116,000 per month and unemployment at 4.2%.
- Balancing Risks: Powell stressed that while inflationary risks have diminished, the Fed remains cautious. The current focus is on balancing inflation control with maintaining employment levels.
The Fed remains adaptable, prepared to adjust its policies based on future economic developments, ensuring that both sides of its dual mandate are met.
