Federal Reserve reduces interest rate by a half-point

This week, the Federal Reserve announced a reduction in the federal interest rate by half of a percentage point, which is double the predicted cut of a quarter-point.

Following the rate announcement, the Federal Reserve released a statement pointing to growth in economic activity and a reduction in inflation; however, the slowing job market is becoming of increasing concern.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. 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. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

“In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”

Officials at the Federal Reserve have a goal of cutting the rate to 3.4% by the end of 2025, and there are predictions that another rate cut announcement could come in December 2024.

Housing is a major challenge across Kentucky, with a shortage of more than 200,000 homes and affordability causing increasing issues. Earlier this year, the Kentucky Chamber released a report detailing the Commonwealth’s housing crisis. Read more about the report and its findings at kychamber.com/housing.