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The Federal Reserve slashed interest rates by half a percentage point on Wednesday (September 18), lowering the federal funds rate to a range between 4.75%-5%. It is the first time the Fed has lowered interest rates since 2020.
The Federal Open Market Committee suggested that additional rate cuts are coming in the future. The Committee's "dot plot" signaled another half-point reduction before the end of the year, followed by a full-point reduction in 2025 and another half-point decrease in 2026.
"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 a post-meeting statement.
The Dow Jones Industrial Average jumped by 200 points when the decision was announced at 2 p.m. ET. The Nasdaq and S&P 500 also reacted positively to the news and were ahead in late-day trading.
"The markets got what they wanted – a big first cut by the Fed," said Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley, via Fox Business. "Beyond how hot or cold the economy runs, that may largely depend on what the Fed has to say about how fast and far it sees rates dropping from here."