What The Fed’s Interest Rate Cut Means For Green Energy

The steepest rate hike in roughly 40 years took a toll on clean energy investments.

The Federal Reserve’s decision Wednesday to start cutting interest rates could bolster green energy investments, which took a hit as the U.S. central bank drastically increased the cost of borrowing money over the past two years in a scramble to tamp down post-pandemic inflation.

At its 2 p.m. meeting, the Fed slashed interest rates by 50 basis points ― one-half a percentage point ― delivering an even larger cut than the quarter of a percentage point Wall Street forecasters initially expected.

But analysts said the market needs rates to come down further to reverse the project delays and cancellations slowing the global transition away from fossil fuels, as well as warned that many emerging clean energy sectors ― from next-generation nuclear power to hydrogen fuel ― require additional support through government policy changes.

“It’s not going to do a huge amount to help the projects that have struggled with the cost of debt,” Peter Martin, the chief economist at the British-based energy consultancy Wood Mackenzie, told HuffPost. “It’s a bit of a psychological boost in terms of showing we are about to close the chapter on those really aggressive rate hikes.”

Starting in March 2022, the Fed hiked rates 11 times, beginning in increments of one-quarter of a percentage point at a time but building into the steepest climb in borrowing costs since the 1980s.