Federal Reserve Lowers Interest Rate to 4%
The U.S. Federal Reserve has officially announced a 0.25% rate cut, setting the federal funds rate at 4.00%, in line with market expectations. This move marks a gradual policy shift amid slowing economic growth and rising uncertainty.
Fed’s Accompanying Statement
In its statement, the Federal Reserve noted that economic activity continues to expand at a moderate pace, while job gains have slowed slightly and unemployment has edged up but remains low.
The central bank highlighted that inflation has risen since the beginning of the year and remains above the 2% target, signaling continued vigilance on price stability.
End of Quantitative Tightening
A key point in today’s announcement was the decision to end quantitative tightening (QT) starting December 2025. The Fed confirmed it will stop reducing its balance sheet, a move aimed at stabilizing liquidity in financial markets after two years of contraction.
Future Policy Outlook
The Fed stated that future rate decisions will be data-dependent, relying heavily on inflation, employment, and broader financial conditions. Chair Jerome Powell emphasized that the central bank is ready to adjust its stance if risks to achieving its dual mandate increase.
The FOMC vote reflected a mild divergence of views:
- For the 25 bps cut: Powell, Williams, Barr, Bowman, Collins, Cook, Goolsbee, Jefferson, Musalem, Waller.
- Against: Stephen Miran (favored 50 bps cut), Jeffrey Schmid (preferred to keep rates unchanged).
Market Reaction
Crypto and equity markets reacted positively to the decision, with Bitcoin (BTC) briefly moving above $113,000, reflecting optimism about renewed liquidity. Analysts expect short-term volatility but a generally supportive environment for risk assets.
