Fed's Historic Rate Cut: Biggest Since 2008
The Federal Reserve made a bold move on Wednesday, cutting interest rates by half a percentage point—the largest reduction in borrowing costs since 2008. The central bank lowered its target range to 4.75%–5%, marking the end of the most aggressive tightening cycle in U.S. monetary policy in four decades. This shift reflects a significant victory over soaring inflation, which has now dropped to less than a third of its pandemic peak. The Fed''s focus is now turning toward supporting a labor market that shows signs of softening.
In an 11-to-1 vote, the Federal Open Market Committee approved the half-point rate cut. The lone dissenter advocated for a smaller, quarter-point reduction—marking the first dissenting vote by a Fed governor since 2005.
The Fed also signaled that two additional quarter-point cuts could be on the horizon this year, although only 10 of the 19 voting officials supported this forecast. Looking further ahead, the Fed projects total rate reductions amounting to 1.5 percentage points in 2025 and 2026.
In conjunction with the rate cut, the central bank revised its unemployment forecast for 2024, raising the expected rate to 4.4% from its earlier estimate of 4% in June.
Fed Chair Jerome Powell reaffirmed the institution’s commitment to reaching its 2% inflation target, down from the current 2.5%. He expressed confidence that inflation is steadily moving in the right direction.
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