The Federal Reserve has initiated its first rate cut in four years, lowering the benchmark federal funds rate by 50 basis points and bringing it to a range of 4.75% to 5%. This cut marks the beginning of a new monetary easing cycle aimed at sustaining economic growth while continuing to moderate inflation. 

Federal Reserve Chair Jerome Powell emphasized that the decision reflects the Fed’s growing confidence in achieving its dual mandate of maximum employment and stable prices. The move comes after months of declining inflation, which reached 2.5% in August, down from a peak of 9.1% in June 2022. However, concerns over a slowing labor market, with job gains softening, pushed the Fed to take more aggressive action than some had expected. 

Looking forward, markets are anticipating further rate cuts. The Fed’s updated projections indicate the likelihood of additional reductions before the year ends. Powell reassured the public that the central bank would continue to assess economic conditions on a meeting-by-meeting basis. 

This decision sets the stage for more rate cuts in 2025 as the Fed seeks a “soft landing” for the economy, balancing growth to stabilize inflation near its 2% target​.

By Ryan Zywotko, CFA, CMT

Director of Investments

CAISSA Wealth Strategies