US Federal Reserve Cuts Interest Rates by 50 Basis Points
Chair Jerome Powell Announces Major Policy Change
New Delhi [India], September 18: The US Federal Reserve has made a significant change in its monetary policy by cutting interest rates by 50 basis points. This decision comes after holding rates steady for eight consecutive meetings.
The Federal Reserve’s monetary policy committee decided to lower the target range for the federal funds rate to 4.75 to 5.0 percent. The committee expressed confidence that inflation is moving towards the 2 percent target and noted that the economic outlook remains uncertain.
Federal Reserve Chair Jerome Powell had hinted at the need for a rate cut during the Jackson Hole Symposium last month, but did not specify the amount. The latest inflation data for August showed a decrease to 2.5 percent, moving closer to the 2 percent goal.
During the COVID-19 pandemic, the US faced high inflation, leading the Federal Reserve to raise policy rates significantly in 2022 and 2023. The rates had been held steady since July 2023.
The rate cut is expected to impact global financial markets. In India, foreign portfolio investors have increased their investments, anticipating better returns. Indian stock indices have been rising, and it remains to be seen how they will react to the Fed’s decision.
On Wednesday, Sensex and Nifty closed slightly lower as investors awaited the Fed’s announcement.
Doubts Revealed
US Federal Reserve -: The US Federal Reserve is like a big bank for the United States. It helps control the money and keeps the economy stable.
Interest Rates -: Interest rates are like the cost of borrowing money. When they are low, it is cheaper to borrow money from banks.
Basis Points -: A basis point is a tiny unit of measure for interest rates. 50 basis points mean 0.50 percent.
Jerome Powell -: Jerome Powell is the person in charge of the US Federal Reserve. He makes important decisions about money and the economy.
Inflation -: Inflation is when prices of things go up over time. The US Federal Reserve wants to keep it around 2 percent so things don’t get too expensive.
Global Markets -: Global markets are places where people buy and sell things like stocks and bonds all over the world. What happens in one country can affect others.
Indian Stock Indices -: Indian stock indices are like report cards for the stock market in India. They show how well the market is doing.
