Federal Reserve decided to decrease interest rates by a shocking .50 percent on Wednesday, in a potential sign that the US economy may be in more trouble than many think.
Following a two-and-a-half-year campaign against inflation that was exacerbated by the pandemic, the central bank implemented its initial rate reduction on Wednesday.
The Fed’s confidence that its combat against inflation is nearing an end is indicated by the jumbo cut of the new federal funds rate, which ranges from 4.75 percent to 5 percent.
Supply channels were disrupted, stores were closed, and millions of Americans were laid off as a result of the pandemic’s severe impact on the economy.
However, the economy experienced an unprecedented surge in activity when the world resumed operations in the spring of 2021.
The consumer price index (CPI), an inflation indicator that monitors a limited number of products and services, has exceeded its optimal level.
While officials from the Biden administration initially excused the increase as “transitory,” prices continued to rise, and inflation reached its highest level since 1982 in November 2021.
In response to inflation, which reached a high of 9.1 percent in June 2022, the Federal Reserve gradually raised interest rates from near zero in March 2022 to a range of 5.25 to 5.5 percent last July.
The unemployment rate increased to 4.3 percent in July and 4.2 percent last month.
Concerns and renewed criticisms that the Federal Reserve may be behind on interest rate cuts were prompted by the consumer-friendly CPI reading and the increase in unemployment.
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