U.S. Federal Reserve makes half-point cut in first rate reduction since 2020

US Federal Reserve cuts lending rate by half a percentage-point before election, aiming to boost economy.

The U.S. Federal Reserve cut its key lending rate by half a percentage-point Wednesday (September 18, 2024) in its first reduction since the pandemic, sharply lowering borrowing costs shortly before November's presidential election.

Policymakers voted 11-to-1 in favor of lowering the U.S. central bank's benchmark lending rate to between 4.75% and 5.00%, the Fed announced in a statement.

They also penciled in an additional half-point of cuts before the end of this year, and an added percentage point of cuts in 2025.

The Fed's decision will affect the rates at which commercial banks lend to consumers and businesses, bringing down the cost of borrowing on everything from mortgages to credit cards less than two months before the U.S. Presidential election.

The Fed said its rate-setting 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 central bank has a dual mandate from Congress to act independently to tackle both inflation and employment.

In updated economic forecasts published alongside the Fed's rate decision, policymakers' median forecasts pointed to an unemployment rate of 4.4%, on average, in the fourth quarter of this year, up from 4.0% in the last update in June.