The U.S. Federal Reserve Significantly Cuts the Base Interest Rate

On Wednesday, September 19, the U.S. Federal Reserve made an unusual move in recent years by reducing its base interest rate by half a percentage point, a significant figure. This reduction came after the Fed helped curb inflation by keeping interest rates high for over two years. However, high rates made borrowing extremely costly for applicants. This is the first interest rate cut by the U.S. Federal Reserve in over four years and indicates its new focus on strengthening the labor market. One of the Fed's responsibilities is to balance inflation rates and employment. Following high-interest rates, job creation has shown clear signs of slowing down. The decision by the Federal Reserve was made less than two months before the presidential election, which could change the economic outlook as Americans prepare to vote. With this action, the Fed reduced the key interest rate from the highest level in two decades, which was 5.3%, to about 4.8%. This interest rate had been maintained for the past 14 months to help curb the worst inflation in four decades. The inflation rate has decreased from a peak of 9.1% in mid-2022 to the lowest level in three years, which is 2.5% in August, not far above the Fed's target of 2%. It is expected that U.S. policymakers will further reduce interest rates by the end of this year, as well as in 2025 and later in 2026. High inflation above 30% has stalled; controlling inflation is becoming more difficult. Global financial markets are experiencing declines; concerns about a recession in the U.S. economy are increasing. The International Monetary Fund states that strong growth in the U.S. economy has helped improve the global economy. The White House, referring to global threats, claims that the U.S. economy is 'vibrant.'