Monetary policy|The key interest rate will be cut by 0.50 percentage points.
of the United States on Wednesday, the central bank decided to cut its key interest rate by 0.50 percentage points.
The decision of the Open Market Committee, which decides on monetary policy, was not unanimous, but one of the members would have been satisfied with an interest rate cut of 0.25 percentage points.
The decision means that the key interest rate range will be changed from 5.25 to 5.50 percent to 4.75 to 5.00 percent. A member of the central bank’s executive board votes in favor of a smaller interest rate cut Michelle Bowman.
“The Open Market Committee’s confidence that inflation is moving sustainably towards two percent has increased, and it estimates that the risks to achieving the employment and inflation targets are roughly balanced.”
Based on the estimates of the members of the Open Market Committee, it is likely that the central bank will continue to cut interest rates this year.
The interest rate cut has a heavy economic significance, as the United States is the world’s largest economy. Easing monetary policy is apt to increase household consumption and business investment. Expectations of future interest rate cuts are also widely reflected in the prices of securities.
The previous one once the central bank cut its key interest rate in March 2020, when the coronavirus pandemic escalated and there were serious disruptions in the global economy.
Two years later, the central bank started a strong tightening of monetary policy to curb the accelerated inflation.
In August, inflation in the United States slowed to 2.5 percent, which is already very close to the central bank’s goal of two percent. The interest rate cut is transmitted to the economy in stages and typically reaches its full effect within a good year.
Central bank predicts in its new economic outlook released Wednesday that the U.S. economy will grow 2.0 percent this year, 2.0 percent next year and 2.0 percent in 2026.
It estimates that inflation will slow to 2.3 percent this year, 2.1 percent next year, and 2.0 percent in 2026.
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