The Federal Reserve made a surprise move on Wednesday, cutting interest rates for the first time since the COVID-19 pandemic, lowering the benchmark federal funds rate to a range of 4.75% to 5%.
The 50 basis point cut marks a significant shift in the Fed’s monetary policy, which had been holding steady at a range of 5.25% to 5.50% since July, the highest level since 2001. The decision comes as the central bank closely monitors economic data for signs that inflation is trending towards its 2% target.
Fed Chair Jerome Powell had previously indicated that the central bank would not wait for inflation to reach 2% before cutting rates. In July, he noted that waiting for inflation to reach the target could result in over-tightening, which could drive inflation below 2%.
The rate cut is expected to be the first in a series of moves to lower interest rates, with markets anticipating further cuts in the months ahead. The CME FedWatch tool predicts a greater than 50% chance of rates being lowered to a range of 4.5% to 4.75% in November.
The rate cut has sparked reaction from economic experts, with Alfredo Ortiz, CEO of Job Creators Network, stating that the move is an admission that the Biden-Harris economy is failing. “The Federal Reserve’s 50 basis point rate cut is an admission that the Biden-Harris economy is failing and urgently needs support,” Ortiz said.
Ortiz also criticized the timing of the rate cut, just before an election, saying it helps the Biden-Harris administration hide the weak economy. He added that the rate cut may be premature given that inflation is still above the 2% target, and that Americans facing a cost-of-living crisis need prices to decline as fast as possible.
Ortiz attributed the economic woes to the Biden-Harris administration’s policies, saying that “inflationary spending and anti-energy policies have put the Federal Reserve and the American economy between a rock and a hard place, with no easy solutions.”
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