On 18 September 2024, the Federal Reserve cut its benchmark interest rate by half a percentage point, the first reduction in more than four years and a signal that the central bank believed the fight against inflation was effectively won. The move, larger than most forecasters expected, put an end to the most aggressive tightening cycle since the 1980s.
The rate had sat at a 23-year high of 5.25 to 5.5 percent for more than a year as the Fed wrestled inflation down from its 2022 peak above nine percent. With price rises cooling toward the Fed’s two percent target and the job market beginning to soften, chair Jerome Powell argued the risk had shifted from inflation to the health of employment, justifying a decisive first cut.
The decision was a milestone for the global economy: a cheaper dollar, easier credit and a rising stock market followed, and central banks from Europe to Asia read it as permission to begin their own easing. The cut, and the new cycle it launched, would help fund a record-breaking rally in equities and set the economic conditions for the election just weeks away.