The Federal Reserve cut the federal funds target rate by 50 basis points to a range of 4.75% to 5.00%. It's the central bank's first rate cut in four years.
In its statement, the Federal Open Market Committee (FOMC) states, "The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance." The statement adds that "the economic outlook is uncertain."
Based on the projections, Fed members see two more 25 basis point cuts this year, followed by four more in 2025.
In the video above, Yahoo Finance Federal Reserve Reporter Jennifer Schonberger reports the breaking details.
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This post was written by Stephanie Mikulich.
50 basis point rate cut. The Federal Reserve slashing its benchmark interest rate by a half a percentage point to a new range of four and three quarters to 5%, marking the first rate cut in more than four years. Now, Fed officials see two more 25 basis point rate cuts this year, followed by four more cuts next year, and two more cuts in 2026. Breaking down what officials saw, nine officials saw four cuts this year. That includes the 50 boys basis point rate cut today. Seven saw three cuts. Two officials saw two cuts this year, and one saw five cuts. Now officials say in their statement, they are gaining confidence that inflation is moving sustainably back down to 2%, saying, removing the word some, and now saying instead that inflation has made further progress towards the Fed's 2% goal. The statement also reading that, quote, the committee has gained greater confidence inflation is moving sustainably towards 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance. Now, future rate cuts will depend on the evolving economic outlook, as well as the incoming data and the balance of risks. Uh the outlook for interest rate projections come as Fed officials now see the unemployment rate rising to 4.4% this year, and holding at that level over the next couple of years. That's up from 4% previously forecast. At the same time, economic growth is seen at 2% this year, instead of 2.1% previously forecast. And officials expect the economy to coast at that 2% level over the next couple of years. As for inflation, they moved down their inflation outlook. They now see inflation ending the year at 2.6%. That's down from 2.8% previously, and then moving down to 2.2% over the next year. Now, there was some division on today's decision. It was a split vote. It was not unanimous. Fed Governor Michelle Bowman dissented, saying that she would have preferred to have cut rates by 25 basis points instead of 50. This marks the first dissent in two years. Back to you.
Jennifer, I'm just curious to to get your take on this decision. Were you surprised by it, Jennifer? You know, we had any number of economists come on this show recently, saying, listen, banging the table for 25, saying data has been decent. The economy is, you know, resilient. Um they thought frankly, now, look at retail sales this week, surprise to the upside. They said, they really thought the Fed was going to do a 25, the normal cut that they had to ramp from there. But interested to get your take.
Yeah, absolutely, Josh. I was a bit surprised. I know we saw some media reports floated uh Friday, Monday, sort of setting the stage for the potential for 50. I was surprised though, because to your point, yes, we've been hearing from a lot of strategists, but other Fed officials coming into the blackout period did not seem to point towards a larger jumbo cut today. They seem to think that the data uh would point towards more of a 25 basis point rate cut, and they would take more of a gradual measured approach. That is what I heard from Fed officials I personally talked to. So, now the question becomes, is the Fed behind the curve? Is this a proactive move? We'll we'll hear from Fed Chair J. Powell here in a couple minutes in the press conference. But it's curious to know whether this was a move, sort of preemptive move, to stave off further weakening in the job market, something certainly that Fed Chair Powell had alluded to back in Jackson Hole, the last time we heard from him. And whether this is to preserve the soft landing scenario.
All right, Jennifer. Thanks so much for breaking this down and bringing us this breaking news here.
