Robin Bradshaw: Interest rates cut by 0.5% as Fed responds to economic indicators

Sep. 18--The Federal Reserve announced on Wednesday, Sept. 18, that it would cut interest rates by half a percentage point as recent indicators suggest economic activity has remained steady and as job gains have slowed but remain low, according to a press release from the Federal Reserve.

"In light of the progress on inflation and the balance of risks, the committee decided to lower the target range for the federal funds rate by half a percentage point," a portion of the release reads, with continued future cuts to come over time as the economy stabilizes with the intent to reach the 2 percent goal.

This is the first cut made by the Fed since it reduced rates to nearly zero at the onset of the COVID-19 pandemic in March 2020.

The rate cut reflects the U.S. entering a new phase with a softening job market as an economic risk rather than elevated inflation, Axios reported. The Fed's decision to cut a half-point, instead of its traditional quarter, suggests evidence of a "faltering job market."

To counter the risks, the Fed said the committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

"In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the release said. "The committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities while helping support efforts in maximum employment and returning inflation to its 2% objective."

The anticipated target rate for the end of 2025 will reach 3.4 percent with four quarter-point rate cuts next year, Axios reported.

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