US Fed Makes Aggressive Rate Cut, Weeks Before Election

AFP/APP

Washington: The US Federal Reserve cut its key lending rate by half a percentage point Wednesday in its first reduction for more than four years, sharply lowering borrowing costs shortly before November’s presidential election.

The Fed’s decision will affect the rates at which commercial banks lend to consumers and businesses, bringing down the cost of borrowing on everything from mortgages to credit cards.

The move marks the beginning of the end of the Fed’s high interest rate environment aimed at throttling demand, with inflation now easing towards the central bank’s long-term two-percent target and the labor market continuing to cool amid a surprisingly resilient post-Covid economy.

Against this backdrop, Wednesday’s large Fed rate cut is probably good news for Democratic presidential candidate and US Vice President Kamala Harris, who is running against Republican former president Donald Trump in the upcoming election.

“While this announcement is welcome news for Americans who have borne the brunt of high prices, my focus is on the work ahead to keep bringing prices down,” Harris said in a statement.

At an event in New York on Wednesday, Trump told reporters that the independent US central bank’s decision was either a response to a “very bad” economy, or it had been “playing politics.” “But it was a big cut,” he added. Major US stock indices finished mixed following the Fed’s decision.