Some economists have called it the end of an era. The The Federal Reserve cut interest rates by 50 basis points. The reference rate of the Fed Funds therefore goes from 5,25-5,50%, the highest level in the last 23 years, at 4,75-5%. Eleven out of 11 governors voted for the mega-cut.
The decision to proceed with a major cut was apparently determined by the deceleration of the labor market. The Federal Reserve noted the slowdown in the creation of new jobs, which increased in August at the slowest pace since the end of the pandemic (142 jobs versus 164 expected). At the same time, "the committee has gained greater confidence that inflation is moving sustainably toward 2% and believes that the risks to its employment and inflation targets are roughly in balance," the FOMC note reads.
It is a highly anticipated, but above all uncertain, decision, with analysts and traders divided on the size of the cut: 25 or 50 basis points. The Fed has opted for the most aggressive line. With the first interest rate cut in four years, the American central bank officially closes the phase of strong increases, the most aggressive since the 80s, and has opened a monetary easing that could last a couple of years. According to monetary operators, in fact, the American central bank could make cuts of 115-120 basis points by the end of the year and 240 by the end of 2025.
The Wall Street reaction
Throughout the day, American stock markets maintained a wait-and-see approach, remaining around parity while waiting to see if the cut would be 25 or 50 basis points. After the Federal Reserve's announcement, Wall Street's main stock markets took the path of increases, with the Dow Jones which earns 0,25%, the S & P 500 which rises by 0,37% and the Nasdaq which achieved the best performance, recording a rise of 0,60%.
