It’s the headline we’ve been awaiting. For the first time in five years, the Federal Reserve has reduced rates.
What does just a half point mean?
It means a slightly less expensive house and lower monthly bills.
But more importantly, it’s what it means to the psyche of the American consumer. It’s a deep sigh of relief, just the notion of a cut. Consumers sitting on their next purchase begin to ponder them again. And as they ponder, the Fed is set to meet again in October and again in November.
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the FOMC said in its post-meeting statement.
The FOMC vote came by an 11-1 vote, with Governor Michelle Bowman preferring a quarter-point. The half point reduction came “in light of progress on inflation and the balance of risks.” The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.
Could we get a full point or more off the key interest rate this year? Maybe, maybe not.
But that dot you see in the darkness is the light at the end of the tunnel.
“The economy is in a good place, and our goal is to keep it there,” Fed Chairman Jerome Powell said, while admitting that housing inflation is a piece of the economy that is stubborn to come down. “We are encouraged by the progress we’ve made.”
“As we normalize rates we will see housing normalize,” he said. “That’s the best thing we can do for householders.”
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