This past summer, interns met with Chair Powell to hear about his experiences. September 10, 2024. Photo courtesy of the Federal Reserve.
Despite Americans still suffering from extremely high prices on the essentials they need, the Federal Reserve run by Jerome Powell has waved the white flag on its fight against inflation. Christopher Rugaber reports in The New York Sun:
The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates helped tame inflation but also made borrowing painfully expensive for American consumers.
The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing. Coming just weeks before the presidential election, the Fed’s move also has the potential to scramble the economic landscape just as Americans prepare to vote.
The central bank’s action lowered its key rate to roughly 4.8 percent, down from a two-decade high of 5.3 percent, where it had stood for 14 months as it struggled to curb the worst inflation streak in four decades. Inflation has fallen to a three-year low of 2.5 percent in August, not far above the Fed’s 2 percent target, from a peak of 9.1 percent in mid-2022.
The Fed’s policymakers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings this year, in November and December. And they envision four more rate cuts in 2025 and two in 2026.
In a statement, the Fed came closer than it has before to declaring victory over inflation: It said it “has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Though the central bank now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent, and other necessities. President Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
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