The Federal Reserve, the US central bank, lowered interest rates to 4.75% to 5% by 0.5 percentage points.
The US interest rate is not a fixed percentage like in the UK, but rather a range that serves as guidance to lenders.
The Fed’s main objective is to reduce inflation to 2%, and since the price shock that hit Ukraine and Russia in 2022, it has utilized interest rates to pull money out of the economy by making borrowing more expensive.
The Fed is not far from its inflation objective, according to recent data, with the primary indicator reaching 2.5% in August, the lowest level since it.
However, indications of a flagging economy surfaced last month when job creation figures stoked concerns about a recession.
In its statement, the Fed made it clear that although it remained optimistic about the prospects for growth and inflation, it was concerned about the rate at which hiring was occurring.
On the 0.5 percentage point drop, there was only one dissenting vote among its rate-setting committee members. Participants in the financial markets have disagreed on whether to choose the 0.25 alternative instead.
Following the announcement, US markets surged, with the Dow Jones Industrial Average and the S&P 500 as a whole rising by more than 0.5% from flat levels just moments before the rate decision was made public.
