US Central Bank To Announce Interest Rate Cut

The US Federal Reserve (Fed) is to announce its first interest rate cut for more than four years on Wednesday, reported the Manila Times.

Senior officials at the US central bank have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank's long-term target of two percent, and the labor market continues to cool.

On Wednesday, the Fed will publish its updated economic forecasts of its 19-member rate-setting committee — including their rate cut expectations.

The debate among policymakers on Tuesday and Wednesday this week will center on whether to move by 25 or 50 basis points, the Manila Times reported.

The expected rate cut will be the Fed's first since March 2020, when it slashed rates to near-zero to support the US economy through the Covid-19 pandemic.

The Fed started hiking rates in 2022 in response to a surge in inflation, fueled largely by a post-pandemic supply crunch and the war in Ukraine.

It has held its key lending rate at a two-decade high of between 5.25 and 5.50 percent for the past 14 months, waiting for economic conditions to improve.

With inflation falling, the US labor market cooling and the US economy growing, policymakers appear to have decided that the conditions are ripe for an interest rate cut.

Debates are likely to be ongoing as to how aggressive the potentially imminent cut must be in order to stimulate the economy while mitigating the risk of reignited inflation.

Analysts widely expect the Fed to start cutting in September.

The Fed has stressed it will make its decision on rate cuts based solely on the economic data.