The Federal Reserve cut its benchmark interest rate by half a percentage point, marking the first rate reduction in over four years. This move kicks off a new cycle of monetary easing, with the federal funds rate now sitting between 4.75% and 5%. The decision was not unanimous, with one member of the Federal Open Market Committee favoring a smaller quarter-point cut. The larger-than-expected half-point reduction signals concerns over the slowing U.S. economy, following a prolonged period of high rates. Stock markets responded positively, with the S&P 500 rising by as much as 0.9% after the announcement.

The Fed’s decision also carries significant implications for future monetary policy. Most officials now expect further cuts, projecting that rates could fall to as low as 4.25% by the end of 2024. The Fed has expressed optimism that inflation is stabilizing but remains cautious about the balance between price stability and maintaining a healthy labor market. The central bank will continue to monitor incoming data as it plans its next moves, especially amid a contentious political environment ahead of the presidential election.