The US Federal Reserve lowers its federal funds rate by 0.25 percentage points to a range of 4.25 to 4.5 percent, the central bank announced on Wednesday. This is the third consecutive rate cut.
The decision was widely expected, and investors paid close attention to the justifications. While the previous rate decision in November had mentioned “further adjustments” of the target range for the federal funds rate, the text was changed to “the scope and timing of further adjustments” this time, implying that further rate cuts are certain, but the timing and magnitude are unclear.
The central bank reiterated its goal of bringing long-term inflation to two percent. However, US inflation had recently risen to 2.7 percent, leading many investors to doubt the continuation of the rate cuts at this pace.
High interest rates typically curb general inflation, but are bad for the stock market. On the other hand, low interest rates fuel inflation.