Home Economy Fed cuts interest rate for first time in 4 years

Fed cuts interest rate for first time in 4 years

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(NewsNation) — The Federal Reserve on Wednesday cut its benchmark interest rate by half a percentage point, something it hasn’t done in more than four years.

Federal Reserve officials were able to do this as the post-pandemic spike in U.S. inflation eased further last month. Year-over-year price increases reached a three-year low.

The White House has been feeling hopeful about the state of the current economy, with officials maintaining that America can pull off a “soft landing” from inflation. 

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Whether this will affect Americans’ perception of the economy remains to be seen. With the election now less than 50 days away, the rhetoric on the campaign trail continues to ramp up around what voters are saying is their No. 1 issue.

The economy has been one of the first topics to come up at both Democratic nominee Kamala Harris’ and Republican nominee Donald Trump’s rallies as they campaign for the presidency. 


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Asked about it Tuesday during an interview with the National Association of Black Journalists in Philadelphia, Harris said she wants to deal with the economy “head-on.” To do this, Harris said, she wants to employ and engage the private sector with tax credits, particularly homebuilders, to give them incentives to create new housing.

Current President Joe Biden’s economic advisers wrote in a blog post published Tuesday night that the economic and job growth under his administration has “surpassed projections.”

Trump, meanwhile, has blamed Biden for what he calls a “failed” economy. He’s said that he wants to get people’s energy bills down by 50% within 12 months if he wins the 2024 election. In addition, Trump wants to work with farmers, who he says are being “decimated” right now.

However, Trump has previously said that he disagrees with the Federal Reserve lowering interest rates and that it is “something that they know they shouldn’t be doing” ahead of the election in November.

Inflation show signs of easing

Last week’s report from the Labor Department showed that consumer prices rose 2.5% in August from a year earlier. That’s down from 2.9% in July and marked the fifth straight annual drop since February 2021. Between July and August, prices only rose by 0.2%.

Cooling inflation has given American consumers some relief after price surges in food, gas and rent over the last three years. In mid-2022, inflation peaked at 9.1%, which marked the highest rate in four decades.

A big factor in this was a third drop in gas prices in just four months. Average gas prices for August fell 0.6% from where they were in July and are 10.6% less than they were a year ago.

Although they are still higher than they were three years ago, grocery prices remained unchanged from July to August. Grocery prices in the last year have only gone up by 0.9%, which is a pace they were at before the COVID-19 pandemic.


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People’s paychecks have also risen steadily, though they are still growing at a solid pace that reduces inflationary levels. For the past 18 months, their overall incomes have outpaced inflation. According to the Census Bureau, the median inflation-adjusted household income rose 4% last year to above $80,000.

Trends suggest inflation will keep slowing down, with Federal Reserve Chair Jerome Powell saying in a speech last month that it was coming under control.

The Associated Press and Reuters contributed to this report.

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