Fed initiates change of course US Federal Reserve lowers key interest rate by 0.5 percentage points

The US Federal Reserve is responding to the slowdown in inflation by lowering its key interest rate for the first time since the outbreak of the coronavirus pandemic. The Fed announced that the key interest rate would now be reduced by 0.5 percentage points to a corridor of 4.75 to 5.00 percent.

DPA

18.09.2024, 20:33

18.09.2024, 20:52

dpa

The US Federal Reserve has lowered its interest rate by 0.50 percentage points. The Fed announced in Washington on Wednesday that the range of key interest rates will be reduced to between 4.75 and 5.00 percent.

This was the central bank's reaction to the slowdown in inflation and the first time in more than four years that it had lowered its key interest rate. Commercial banks can borrow central bank money at this rate.

This is an unusually large interest rate cut. The central bank is also signaling further interest rate cuts this year.

The change of course towards a looser monetary policy had been expected. However, it was unclear whether the central bank of the world's largest economy would opt for this large interest rate jump or choose the more cautious path and only lower interest rates by 0.25 percentage points.

The Fed last cut the key interest rate in March 2020 to stimulate the economy during the onset of the coronavirus pandemic. After that, interest rates initially remained at the zero mark. Until the Fed began raising rates at a record-breaking pace in March 2022.

In the USA, however, the upward pressure on prices has now slowed recently. The inflation rate fell to 2.5% in August. In 2022, this had still amounted to a good 9 percent at times. However, the rate is currently still above the Fed's inflation target of 2%.

Other central bankssuch as the European Central Bank (ECB) and the Swiss National Bank (SNB) had already initiated the turnaround in interest rates.