The Federal Reserve announces a 50 basis point interest rate cut, marking the first such cut since 2020

On the 18th local time, the Federal Reserve of the United States ended its two-day monetary policy meeting and announced a 50 basis point reduction in the target range of the federal funds rate to 4.75% to 5%, marking the first time the Fed has cut interest rates since 2020. Analysis suggests that historically, unless faced with a major economic crisis, the Federal Reserve has rarely significantly reduced interest rates by 50 basis points when initiating a new cycle of interest rate cuts. The Federal Reserve's interest rate cuts this time, exceeding institutional expectations, may be aimed at achieving a "soft landing" of the economy and hedging against the risk of economic activity stalling.

Recent data shows that the US Consumer Price Index (CPI) rose 2.5% year-on-year in August, reaching a new low since February 2021 and approaching the Federal Reserve's inflation target of 2%. However, at the same time, the important driving force of US economic growth - personal consumption expenditure growth - is slowing down, and manufacturing activity has been in a contraction range for multiple months. The labor market has also remained weak, and the number of new jobs in the private and non farm sectors has decreased significantly month by month. These factors have raised concerns among some investors that the US economy is approaching a recession.

Previously, the Federal Reserve raised interest rates 11 times in a row from March 2022 to July 2023, with a cumulative increase of 525 basis points. Over the past year, the Federal Reserve has maintained its target range for the federal funds rate between 5.25% and 5.5%, the highest level in 23 years. On September 19th, the Federal Reserve lowered its target range for the federal funds rate by 50 basis points to 4.75% to 5.00%.