• Economy

Washington, Sep 18 (EFE).-

The Federal Reserve announced Wednesday a half-point reduction in US interest rates.

Wednesday’s was the first cut after a cycle of 11 increases that began in March 2022, when inflation was rampant due to the pandemic and the war in Ukraine.

US Federal Reserve Chairman Jerome Powell said Wednesday that the regulator will calibrate its policy cuts calmly and according to the economy.

“I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’ I think we’re going to go carefully meeting by meeting and make our decisions as we go,” Powell said.

The benchmark interest rate will remain between 4.75% and 5%, the central bank said in a statement, in which it did not give any indication of possible future cuts.

The median of the Fed governors’ forecasts points to rates at 4.4% in 2024 (the equivalent of a range of 4.25% to 4.5%), falling to 3.4% in 2025 and 2.9% in 2026.

“The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” said the Reserve’s statement.

After 11 hikes since March 2022 to control inflation, the benchmark interest rate had been between 5.25% and 5.5% since July 2023, the highest since January 2001.

The drop comes as the US Consumer Price Index is at its lowest since February 2021. In August, it fell four-tenths of a point to 2.5% year-over-year.

The labor market has been stringing together months of poor job creation data and signs of cooling, with the rate at 4.2% and 7.1 million unemployed, 800,000 more than a year ago.

The European Central Bank and other institutions have cut interest rates for months. Still, the Fed has been much more conservative, claiming until now that the economic data was not reliable enough to initiate cuts.

The Fed decided to cut by 50 basis points, rather than 25 as some economists had predicted, despite greater scrutiny of the central banks due to the November elections.

US stocks extended gains after the Fed’s statement and ahead of Chairman Jerome Powell’s press conference, which begins at 2:30 pm Eastern time. The S&P 500 closed up 25 points, or 0.46%.

The tech-focused Nasdaq, meanwhile, rose 134 points, or 0.76%, while the Dow was last marked 120 points to the upside. EFE

pem/mcd/ics