US Fed reduces interest rate to 4.75% — first cut in four years

The United States (US) federal open market committee (FOMC) has reduced its interest rate by 0.5 percent — its first cut in four years.

FOMC, a committee under the US Federal Reserve (Fed), deliberates on monetary policies to influence the availability and cost of money and credit to help promote national economic goals.

The committee reduced the federal funds rate, which serves as the benchmark for borrowing rates in the banking industry, to a range between 4.75 and 5 percent.

During a press conference on Wednesday, Jerome Powell, chairman of the Federal Reserve and FOMC, said the decision reflects the Fed’s confidence that, with policy adjustments, labour market strength can be sustained alongside moderate growth and inflation moving toward 2 percent.

“Our economy is strong overall and has made significant progress toward our goals over the past two years. The labour market has cooled from its formerly overheated state,” Powell said.

“Inflation has eased substantially from a peak of 7 percent to an estimated 2.2 percent as of August. We’re committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal.

“Today, the Federal Open Market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by a half percentage point.