The Fed is finally about to cut interest rates. What took so long?

It’s a pivotal week for the US economy, with the Federal Reserve expected to cut interest rates for the first time since 2020. The move would mark a major milestone both for the central bank’s long fight with inflation and for Americans battling a higher cost of living for the past two years.

It’s a pivotal week for the US economy, with the Federal Reserve expected to cut interest rates for the first time since 2020. The move would mark a major milestone both for the central bank’s long fight with inflation and for Americans battling a higher cost of living for the past two years. But it’s also an expectation that is coming to fruition much later than the Fed and Wall Street expected in the beginning of the year. Fed officials and investors have long anticipated that borrowing costs would come down in 2024 — at some point — according to their economic forecasts. At the end of last year, the air was brimming with hope that the Fed would start cutting rates early in 2024, easing pressure not just for consumers, but also for businesses of all sizes hampered by higher costs. A spring rate cut seemed to be in the cards around the turn of the year, according to the futures market, and most major Wall Street banks estimated the first rate cut’s arrival sometime before the summer. But nine months in, rate cuts still haven’t happened, drenching Wall Street’s parade and leaving US consumers squeezed by elevated interest rates. All that could start to change on Wednesday. It’s simple: The Fed didn’t cut interest rates sooner because it could have reignited inflation or left it stuck above the central bank’s target. While it was a steady (but grueling) journey getting inflation down from its 2022 peak of 9.1%, the bumpy first half of this year proved otherwise, vindicating the Fed’s patience.