US Economy on High Alert: Federal Reserve Set to Make Bold Moves Amid Soaring Employment and Housing Indicators
- (Central News Agency reporter Liao Hanyuan, New York, 18th) The US Federal Reserve (Fed) today decided to cut interest rates by a rare 0.5 percentage points, a bold...
- To prevent inflation from spiraling out of control, the Federal Reserve launched a post-pandemic interest rate hike cycle in March 2022.
- The Federal Reserve's decision to cut interest rates by 0.5 percentage points is seen as a bold move to boost the future of the US economy and job...
2024/9/19 07:08
(Updated 9/19 07:23)
Federal Reserve Cuts Interest Rates by 0.5 Percentage Points
(Central News Agency reporter Liao Hanyuan, New York, 18th) The US Federal Reserve (Fed) today decided to cut interest rates by a rare 0.5 percentage points, a bold decision made by Fed Chairman Jerome Powell. The impact of this decision will be closely watched, particularly whether central banks in other countries will follow suit and whether the US employment and housing markets will improve.
Interest Rate Hike Cycle
To prevent inflation from spiraling out of control, the Federal Reserve launched a post-pandemic interest rate hike cycle in March 2022. In the same year, it raised interest rates four times to 0.75% and twice to 0.50% last year. Although the Federal Reserve stopped raising interest rates in the summer, it still takes reducing inflation as its main task and decided to maintain a high interest rate environment. Borrowing costs have been high for more than two years, but inflation has improved significantly from 9.1% in July 2022 to 2.5% in August this year.
Impact on the US Economy and Job Market
The Federal Reserve’s decision to cut interest rates by 0.5 percentage points is seen as a bold move to boost the future of the US economy and job market. The importance of this decision goes beyond tackling inflation, as interest rates may rise from 3% to 4% this year.
Global Impact
As the US dollar is the world’s most important reserve and trading benchmark currency, the impact of a 0.5% interest rate cut will affect everything from the state of the US dollar to changes in major currency exchange rates, bond markets, corporate debt, mortgages, car, and credit card interest rates.
Comparison with Other Countries
The US kept interest rates high for the first time in two-and-a-half years and cut the federal funds rate target to between 4.75% and 5%, although the Eurozone, Canada, the UK, Mexico, etc. have been ahead of the US in cutting interest rates in advance to revive the economy. Central bank officials in Korea, Indonesia, and other countries are still awaiting the Fed’s action before making a decision.
Future Interest Rate Cuts
The Wall Street Journal analyzed that based on interest rate cycle forecasts, if the unemployment rate and inflation decline, the United States may cut interest rates by 1% four times next year, and the federal funds rate will decrease to 3.5% by the end of 2025.
Impact on the US Housing Market
Federal Reserve interest rate cuts may stimulate economic activity, but the impact on the US housing market remains difficult to assess. After the pandemic, housing prices in the US have risen beyond the means of most people, indicating that there is still a gap between people’s affordability and high housing prices.