U.S. Federal Reserve cuts interest rates by half a percentage point

The U.S. Federal Reserve cut interest rates by half of a percentage point on Wednesday, kicking off what is expected to be a steady easing of monetary policy with a larger-than-usual reduction in borrowing costs that followed growing unease about the health of the job market.

"The committee has gained greater confidence that inflation is moving sustainably toward two per cent, and judges that the risks to achieving its employment and inflation goals are roughly in balance," policymakers on the U.S. central bank's rate-setting committee said in their latest statement, which drew a dissent from Governor Michelle Bowman, who favoured only a quarter-percentage-point cut.

Policymakers see the Fed's benchmark rate falling by another half of a percentage point by the end of this year, another full percentage point in 2025, and by a final half of a percentage point in 2026, to end in a 2.75 per cent to 3.00 per cent range.

The endpoint reflects a slight upgrade, from 2.8 per cent to 2.9 per cent, in the longer-run federal funds rate, considered a "neutral" stance that neither encourages nor discourages economic activity.

Even though inflation "remains somewhat elevated," the Fed statement said policymakers chose to cut the overnight rate to the 4.75 per cent to 5.00 per cent range "in light of the progress on inflation and the balance of risks."

The Fed "would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," with attention to "both sides of its dual mandate" for stable prices and maximum employment.

Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. ET to discuss the policy decision and the economic outlook. The Fed's policy meeting this week was its last before voters go to the polls in what is expected to be a close U.S. presidential election on Nov. 5.