US Federal Reserve announces half-point cut in interest rates, first in four years

The US Federal Reserve announced an interest rate cut of half a percentage point on Wednesday, the first downward adjustment in four years and a move that follows a slow but steady decline in America’s inflation rate.

Coming weeks before the November 5 presidential election, the aggressive cut of 50 basis points should lead to lower borrowing costs for consumers and businesses, reducing the threat of a so-called “hard landing” for the economy.

Higher consumer prices that have prevailed through much of US President Joe Biden’s administration have been a key point on which Republicans, including the party’s nominee, Donald Trump, have hammered Democrats.

Markets had been expecting the US central bank to lower its benchmark borrowing rate by at least 25 basis points from its 5.25-5.50 per cent range, owing to economic indicators showing that the time for a reduction had come.