< p>The US Federal Reserve cut the key interest rate by 0.5 for the first time since the pandemic. With this, it officially launched a policy of loosening its monetary policy to support the economy. The announced downgrade was largely expected, and signals were given well in advance of the announcement.
Thus, the interest rate drops to a level of 4.75 - 5.00%, and there are signals that more reductions are to come. The decision comes amid inflation slowing and edging closer to the 2% target, but also growing concerns about the labor market.
Markets and analysts were unsure whether the cut would be half or a quarter point, and the announced 0.5% was interpreted as the start of an expected series of declines. But this decision suggests that the Central Bank has serious concerns about a possible weakening of the American economy.
The last such cut of more than a quarter of a point was taken at the height of the Covid crisis and aimed at stimulating the economy, with the Fed holding interest rates at their highest level in two decades in an attempt to tackle high inflation in USA. The peak of over 9% was in 2022. Despite expectations of a slowdown in output and job losses, the US economy surprised many by not only avoiding a recession but continuing to grow at a relatively high rate.
Due to weak activity in the Eurozone, the European Central Bank began to loosen its policy and has already announced two reductions of 0.25 points each.