Thu Sep 19 05:33:05 UTC 2024: ## US Fed Slashes Rates by 50 Basis Points, Signaling Easing Cycle

**New York, September 18, 2024** – The US Federal Reserve (Fed) announced a significant interest rate cut of 50 basis points (bps) on Wednesday, marking its first reduction in borrowing costs in four years. This bold move, exceeding market expectations, signals the beginning of a broader easing cycle as inflation cools.

The Fed’s benchmark interest rate now stands at 4.75% to 5.00%, down from 5.25% to 5.50%. The decision was made by an 11-to-1 vote, with Governor Michelle Bowman dissenting in favor of a smaller, 25-bps cut.

The Fed’s dot plot, detailing officials’ projections for future rate adjustments, indicates another 50-bps cut by year-end, followed by additional reductions in 2025 and 2026. The median forecast predicts a final rate range of 2.75% to 3.00% by 2026.

This aggressive easing comes as inflation has eased from its peak in mid-2022. The Fed has gained greater confidence that inflation is moving sustainably toward its 2% target. However, concerns about a weakening job market remain, prompting the central bank to prioritize economic growth over inflation control.

The move has sparked a mixed reaction in financial markets. While gold prices rose to a record high after the announcement, stocks closed with modest losses as Fed Chair Jerome Powell cautioned against expecting continuous big rate cuts. The US dollar also rose against other currencies, recovering from an earlier tumble.

The Fed’s decision is likely to have a ripple effect globally. Other central banks, including the Reserve Bank of India (RBI), are expected to follow suit with their own easing measures. This could benefit sectors in India that are leveraged, such as metals and infrastructure, but potentially hurt the banking sector already struggling with lower deposit rates.

The Fed’s rate cut signifies a shift in priorities for the US economy, with growth now taking precedence over inflation control. However, the path ahead remains uncertain, with risks to both sides of the Fed’s dual mandate.

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