Federal Reserve Cuts Interest Rates by Half a Point

The U.S. Federal Reserve announced on Wednesday that it will lower the federal funds rate by half a point. The rate is the amount it charges banks to borrow funds, which in turn affects the rates consumers and businesses see for loans, mortgages, credit cards and other finances, and can impact the economy as a whole.

The Federal Reserve said the decrease will help decrease inflation, and was justified due to the economy achieving a better balance with employment levels.

“U.S. small businesses will likely be relieved by this week’s cut in official interest rates by the Federal Reserve,” said Louise Southall, an economist at Xero, a global small business platform with more than 4 million subscribers worldwide. “Small businesses should benefit via the positive impact it will have on their own borrowing costs and also because it lowers the cost of debt repayments for their customers.”

“While only a small cut in official interest rates, this decision should start to ease the squeeze on both household budgets and small businesses,” she added. “Hopefully this will mean people can spend a little more with local small businesses for the remainder of 2024.”

In a statement, the Federal Reserve said: “The 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.”

In reaction to the interest rate cut, the Dow Jones stock market was trading near record highs at mid-day Wednesday, at 41,775 at this writing.

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