The Federal Reserve has lowered its interest rate from 5.5% to 5.0%, marking its first reduction in 54 months. This move, made by a 11-1 vote, is the first rate cut since March 2020. Fed Chairman Jerome Powell emphasized that the Fed's priority is to reduce inflation, and future rate decisions will be made on a meeting-by-meeting basis.
Powell stated that while inflation has decreased, it remains above the Fed's 2% target. The job market remains strong, but with some upward pressure on unemployment. The Fed's focus is on achieving price stability and maintaining maximum employment. Powell noted that if economic conditions and inflation persist, the pace of rate cuts may be adjusted accordingly.
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The Fed also revised its economic projections. For 2024, GDP growth expectations were reduced from 2.1% to 2.0%. The median interest rate forecast for this year dropped from 5.1% to 4.4%, with further downward adjustments for the next few years. Core PCE inflation forecasts were lowered, reflecting an expected decrease in inflationary pressures.
The Fed continues to monitor economic indicators closely and will adjust its policies to address risks and achieve its dual mandate of price stability and full employment. The next steps will depend on evolving economic data and market conditions.
