Fed cuts rates by 50 basis points for the first time since 2020
The U.S. Federal Reserve made a historic move on Wednesday by reducing interest rates by half of a percentage point in response to slowing inflation and to counteract a softening labor market. This marks the first reduction in the federal funds rate since March 2020, adjusting its target range to between 4.75 percent and five percent and indicating the beginning of a cycle of easing.
TroibNews 
On Wednesday, the U.S. Federal Reserve lowered interest rates by half a percentage point in response to easing inflation and in an attempt to mitigate a faltering labor market.
This marks the first reduction in the federal funds rate since March 2020, adjusting the target range to between 4.75 percent and five percent, and signaling the commencement of an easing cycle.
In the wake of the rate cuts, U.S. stock markets experienced modest declines, with the Dow Jones Industrial Average dropping by 0.25 percent, while the S&P 500 and the tech-heavy NASDAQ Composite Index fell by 0.29 percent and 0.31 percent, respectively.
Following the Fed's lead, several central banks in the Gulf region—including Saudi Arabia, the United Arab Emirates, and Qatar—have also adjusted their rates, a common practice for oil and gas exporters whose currencies are pegged to the U.S. dollar.
In anticipation of the Fed's Federal Open Market Committee meeting, Matt Weller, the global head of Market Research at GAIN Capital, pointed out that the market was almost evenly divided on whether the Fed would implement a rate cut of 25 or 50 basis points. He remarked that the level of market uncertainty prior to the Fed meeting, which hasn’t been seen in a decade, reflects what some might consider a failure of the Fed's policy.
Since March 2022, the Fed has hiked rates consecutively eleven times to tackle inflation not seen in forty years, pushing the target range for the federal funds rate to between 5.25 percent and 5.5 percent, the highest levels in over two decades.
After sustaining high rates for more than a year, the Fed's stringent monetary policy came under pressure to change direction due to decreasing inflationary pressures, indications of a weakening job market, and signs of slowing economic growth.
The most recent "dot plot" outlook suggests that Fed policymakers anticipate further rate cuts this year, with nine out of the 19 members foreseeing an additional 50 basis points in cuts by year-end, while seven members predict a 25-basis-point cut.
Mathilde Moreau contributed to this report for TROIB News
This marks the first reduction in the federal funds rate since March 2020, adjusting the target range to between 4.75 percent and five percent, and signaling the commencement of an easing cycle.
In the wake of the rate cuts, U.S. stock markets experienced modest declines, with the Dow Jones Industrial Average dropping by 0.25 percent, while the S&P 500 and the tech-heavy NASDAQ Composite Index fell by 0.29 percent and 0.31 percent, respectively.
Following the Fed's lead, several central banks in the Gulf region—including Saudi Arabia, the United Arab Emirates, and Qatar—have also adjusted their rates, a common practice for oil and gas exporters whose currencies are pegged to the U.S. dollar.
In anticipation of the Fed's Federal Open Market Committee meeting, Matt Weller, the global head of Market Research at GAIN Capital, pointed out that the market was almost evenly divided on whether the Fed would implement a rate cut of 25 or 50 basis points. He remarked that the level of market uncertainty prior to the Fed meeting, which hasn’t been seen in a decade, reflects what some might consider a failure of the Fed's policy.
Since March 2022, the Fed has hiked rates consecutively eleven times to tackle inflation not seen in forty years, pushing the target range for the federal funds rate to between 5.25 percent and 5.5 percent, the highest levels in over two decades.
After sustaining high rates for more than a year, the Fed's stringent monetary policy came under pressure to change direction due to decreasing inflationary pressures, indications of a weakening job market, and signs of slowing economic growth.
The most recent "dot plot" outlook suggests that Fed policymakers anticipate further rate cuts this year, with nine out of the 19 members foreseeing an additional 50 basis points in cuts by year-end, while seven members predict a 25-basis-point cut.
Mathilde Moreau contributed to this report for TROIB News
