Federal funds rates were raised eleven times in just sixteen months and stayed at those rates for over a year. Recently, the Federal Reserve announced a one-half percentage point (0.5%) decrease in the Federal funds rate. The Wall Street Journal discusses why the next few months are crucial for the Federal Reserve and Jerome Powell.
The Federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis. So basically, the Federal funds rate is the interest rate banks charge other banks. (Wikipedia)
The United States Federal Reserve had the federal funds rate at a range of 5.25% to 5.5%, which had been its highest level in over two decades. In July of 2024, the national inflation average finally dropped to approximately 2.5% while economists have pointed out cooling within the US labor market. More employers are making do with less staff.
Wall Street Journal discusses the policy adjustment, labor market focus, how rate cuts help, and how this could become a make-or-break moment for the Federal Reserve.
