Finance & economics | Ignoring the noise

Why the Federal Reserve has gambled on a big interest-rate cut

The bold move carries economic and political risks

Jerome Powell speaks at a news conference following the decision to cut interest rates
Photograph: Getty Images
|Washington, DC

The Federal Reserve’s decision on September 18th to lower interest rates by half a percentage point, to between 4.75% and 5%, is momentous. As the first cut by America’s central bank since it lifted rates to quell inflation, the shift marks the start of a monetary-easing cycle. It also represents a bet that inflation will soon be yesterday’s problem and that action is required to support the labour market. For the first time since 2005, one of the Fed’s governors in Washington dissented from the decision. Michelle Bowman preferred to cut rates by a quarter-point.

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This article appeared in the Finance & economics section of the print edition under the headline “Noise cancelling”

From the September 21st 2024 edition

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