First Fed interest rate cut in 4 years sized at 50 bps

cryptowiki.ru:

The Federal Reserve reduced interest rates by 50 basis points Wednesday — a divergence from some industry watchers who expected a more conservative initial cut.

Fed Chair Jerome Powell had made it clear the central bank intended to reduce rates, noting last month: “The time has come for policy to adjust.” In a statement this afternoon, the Federal Open Market Committee (FOMC) said the decision came “in light of the progress on inflation and the balance of risks.” “The committee has gained greater confidence that inflation is moving sustainably toward [2%], and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the committee noted. “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate.” Ahead of the expected rate reduction from its previous 5.25%-5.50% range, the question remained whether the cut would amount to 25bps or 50bps.

CME Group’s FedWatch tool indicated a 55% probability of a 50bps cut a couple hours before the FOMC’s statement. Some industry watchers and executives had said that while investors could view a 25bps cut as a normal measure, a 50bps cut could spur fears of a recession and bring on volatility.  “The Fed has only cut 50bps in a non-emergency situation once in the past 40 years,” Astoria Portfolio Advisors founder John Davi wrote in a blog post earlier this week. “In our view, the Fed would be making a mistake as it would imply the economy is much weaker than currently suggested.” Still, the Fed opted for the cut of 50bps.

Jake Ostrovskis, OTC Trader at Wintermute, said in a statement earlier today that “some degree of market re-pricing is inevitable, regardless of the decision” given the