"We know that it is time to recalibrate our policy to something that's more appropriate given the progress on inflation," Federal Reserve Chair Jerome Powell said at a news conference Wednesday after the central bank cut its benchmark interest rate by an unusually large half-point. The move was a dramatic shift after more than two years of high rates that helped tame inflation but also made borrowing painfully expensive for American consumers, the AP reports. In a statement, the Fed came closer than it has before to declaring victory over inflation: It said it "has gained greater confidence that inflation is moving sustainably toward 2%."
The Fed signaled Wednesday that it expects to cut the federal funds rate by another half a percentage point through the end of the year. That could mean a traditional-sized cut of a quarter of a percentage point at each of its two remaining meetings scheduled for 2024, reports the AP.
- Some critics say the Federal Reserve is moving too late to protect the economy and may have missed the window to prevent a recession. "We don't think we're behind," Powell said. "We think this is timely. But I think you can take this as a sign of our commitment not to get behind." He said the Fed is not in "a rush to get this done" and will carefully make decisions "meeting by meeting."
- "We're trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation," Powell said, per CNBC.
- After several years of strong job growth, employers have slowed hiring, and the unemployment rate has risen nearly a full percentage point from its half-century low in April 2023 to a still-low 4.2%. "The labor market is actually in solid condition," Powell said Wednesday. "Our intention with our policy move today is to keep it there." The time to support the labor market, he said, "is when it's strong and not when you begin to see the layoffs. That's the situation we're in."
- Democrats in Congress praised the move, calling it a "big win for families," the Washington Post reports. "Let's be clear: today's decision is a big win for families across the country," said Sen. Martin Heinrich, chairman of the Joint Economic Committee. "Lower rates mean that more families will be able to buy a home or a car without high interest payments looming over them, and their credit card bills will go down."
- Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, said Powell may have "jumped the gun" with the large cut, CNBC reports. "Unemployment may indeed rise but we are not seeing layoffs," she said. "My criticism of the Fed has been a myopic focus on backward-looking data. This feels like that. A single weak employment report and here we are."
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