Jumbo-sized rate cut: Fed slashes rates by a half percentage point

The Federal Reserve was widely expected to announce at least a quarter-point cut on Wednesday, signaling lower borrowing costs for American households and businesses.

US stocks were higher but gave back some earlier gains on Wednesday as Federal Reserve Chair Jerome Powell addressed reporters’ questions in a post-meeting press conference. The Dow rose 87 points, or 0.2%. The S&P 500 gained 0.4% and the Nasdaq Composite added 0.7%. The Fed’s decision to cut interest rates by a half point suggests that it is worried about the state of the job market, which has showed signs of cooling in recent months. This is the first time the central bank has cut rates since the onset of the Covid pandemic in March 2020. Generally, the Federal Reserve prefers to raise or lower interest rates by no more than a quarter point at an individual meeting unless there’s reason to believe that economic conditions will change substantially in the coming months. So the decision to cut rates by a half point Wednesday, even though Fed officials have said throughout the year that they don’t foresee the economy entering a recession, was somewhat unusual. Fed Chair Jerome Powell justified Wednesday’s decision, saying in a post-meeting press conference that people should “take this as a sign of our commitment not to get behind.”