The interest rate is now at 4.75-5.0 percent.
Wednesday's rate cut was unexpectedly large. Before the announcement, there was much speculation about how large it would be. Several analysts believed that the Fed would be satisfied with 0.25 percentage points, but the central bank instead implemented a double rate cut. One of the board members thought that 0.25 percentage points would have been sufficient.
The Fed has gained greater confidence that inflation is sustainably moving towards the 2 percent target.
We know that it's time to recalibrate our (interest rate) policy to something more suitable given the progress made with inflation, said Fed Chairman Jerome Powell at a press conference after the announcement, according to AP.
We're not saying that the mission is accomplished ... but I must say that we are encouraged by the progress we've made, he continued.
According to the Fed's forecast, further rate cuts are expected in the future. The Fed expects the interest rate to be cut by an additional 0.50 percentage points this year. According to the forecast, there will be four rate cuts next year and two more in 2026.
Wednesday's rate cut was the first in over four years. The Fed raised interest rates rapidly in 2022-2023 to counteract the effects of the inflation shock. The last rate hike before today's cut was made in July 2023. The interest rate was then at its highest level in over 20 years.
After the interest rate announcement, the American stock exchanges rose slightly.
