The Fed to Lower Interest Rates for the First Time in Four Years

The Federal Reserve is set to announce its first interest rate cut in over four years on Wednesday, a move aimed at reducing borrowing costs for consumers and businesses ahead of the presidential election.

Inflation has been tamed, with the rate dropping from a peak of 9.1% in June 2022 to 2.5% last month, just above the Fed’s 2% target. While Wall Street is speculating about a potential half-point cut, many analysts expect a more standard quarter-point reduction.

The Fed's focus has shifted to supporting a softening job market amid rising unemployment, which recently increased to 4.2%—up nearly a full percentage point since its low in April 2023. Despite this, many economists believe the rise is due to more job seekers entering the market rather than widespread layoffs.

Chair Jerome Powell indicated last month that the Fed is ready to act to maintain economic growth. Rate cuts are anticipated to continue into 2025, helping lower costs for mortgages and loans, potentially boosting business spending and stock prices.

As the Fed prepares for this change, some rates have already started to decline; for example, the average 30-year mortgage rate has dropped to 6.2%, the lowest in 18 months.