New York (TIP)- The US Federal Reserve cut its key lending rate by half a percentage-point Wednesday in its first reduction since the pandemic, sharply lowering borrowing costs shortly before November’s presidential election.
Policymakers voted 11-to-1 in favor of lowering the US central bank’s benchmark lending rate to between 4.75 percent and 5.00 percent, the Fed announced in a statement.
They also penciled in an additional half-point of cuts before the end of this year, and an added percentage point of cuts in 2025.
The Fed’s decision will affect the rates at which commercial banks lend to consumers and businesses, bringing down the cost of borrowing on everything from mortgages to credit cards less than two months before the US presidential election.
The Fed said its rate-setting committee “has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
The central bank has a dual mandate from Congress to act independently to tackle both inflation and employment.
In updated economic forecasts published alongside the Fed’s rate decision, policymakers’ median forecasts pointed to an unemployment rate of 4.4 percent, on average, in the fourth quarter of this year, up from 4.0 percent in the last update in June.
Officials also penciled in an annual headline inflation rate of 2.3 percent, slightly lower than in June.
Sensex, Nifty scale fresh peaks
Benchmark equity indices Sensex and Nifty surged to their fresh record high levels in early trade on Thursday, September 19, after the US Federal Reserve cut its benchmark interest rate after more than four years.
The 30-share BSE Sensex jumped 735.95 points to scale a new all-time high of 83,684.18 in early trade. The NSE Nifty also surged 209.55 points to hit a fresh record peak of 25,587.10.
From the 30 Sensex firms, NTPC, Axis Bank, Tata Motors, Tata Consultancy Services, Bharti Airtel, Tech Mahindra, Infosys and HDFC Bank were the biggest gainers.
Bajaj Finserv emerged as the only laggard from the pack.
In Asian markets, Tokyo, Shanghai and Hong Kong rallied while Seoul quoted marginally lower.