The policymaking Federal Open Market Committee drops the target range for its overnight lending rate to 2% to 2.25%, or 25 basis points from the previous level.
The Fed cites “implications of global developments for the economic outlook as well as muted inflation pressures” in its first rate cut since December 2008.
The Fed also leaves the door open to future cuts, saying it will “act as appropriate to sustain the expansion.”
The central bank also ends its balance sheet reduction two months earlier than planned.
The Federal Reserve lowered its benchmark rate by a quarter point Wednesday as an insurance policy not against what’s wrong with the economy now, but what could go wrong in the future. It was the first rate cut by the central bank in more than a decade.
Amid President Donald Trump’s intense political pressure and persistent market expectations, the policymaking Federal Open Market Committee dropped the target for its overnight lending rate to a range of 2% to 2.25%, or 25 basis points from the previous level.
In approving the cut, the FOMC cited “implications of global developments for the economic outlook as well as muted inflation pressures.” The committee called the current state of growth “moderate” and the labor market “strong,” but decided to loosen policy anyway.
The stock market dove later in the afternoon when Fed Chair Jerome Powellnoted that the cut was simply a “midcycle adjustment” and that the committee did not see the type of marked economic weakness that would necessitate a longer rate-cutting cycle.
The rate is tied to most forms of consumer debt and is likely to almost immediately have an impact on lowering credit costs.