The US Federal Reserve has lowered interest rates for the first time in over four years, implementing a larger-than-expected cut. The central bank reduced its key lending rate by 0.5 percentage points, bringing it to a range of 4.75% to 5%.
Federal Reserve Chair Jerome Powell described the move as “strong” but necessary, citing a slowdown in price increases and growing concerns about the job market. The rate cut is expected to provide relief to US borrowers who have been dealing with the highest interest rates in more than two decades.
The cut, which was larger than analysts had predicted just a week ago, signals that rates could drop another half percentage point by the end of the year. Powell emphasized that the action was taken to prevent high borrowing costs, initially raised to combat inflation, from harming the US economy.
“The labor market is strong, and we want to keep it that way,” Powell said.
Jennifer Heasley, the owner of Sweet Mama’s Mambo Sauce in York, Pennsylvania, expressed relief over the rate cut. After using credit cards to finance her business expansion two years ago, she had been struggling with rising interest rates. One of her credit cards now charges her 21%.
“My interest rates have gone up, so my monthly payments have increased tremendously,” Heasley said. “For me, it is a big deal for rates to start coming down.”
Following the announcement, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq initially rose but ended the day slightly lower.