Fed Kicks Off Rate Cuts with Juicy 0.50% Trim. Another Half Point Coming by End of 2024

After many questions over the size of the cut, the US central bank met Wall Street’s loftiest consensus calls with a bold half a point cut to borrowing costs.

• The US Federal Reserve finally kicked off its long-awaited easing of monetary policy, giving traders and investors what they wanted. The first cut to interest rates USINTR in four years is not the smaller 25 basis points.Central bankers leapfrogged that and opted for the bigger jumbo-sized cut of 50 basis points from the get-go, landing the benchmark interest rate at 5% from the previous 23-year high of 5.5%.
• What’s more, policymakers now see rates at 4.5% at the end of 2024, meaning that another half-point trim to borrowing costs is being factored in at any of the remaining two regular Fed meetings in November and December. Going even further in the forward-looking guidance, Fed Chair Jay Powell and his clique of central bankers are looking to drop interest rates to 3.5% in 2025 if things go well with inflation and employment.
• First reactions across global markets: gold pumped to a fresh record high of $2,600 per ounce, up from a daily low of $2,566 per ounce. The US dollar index tumbled to a low of 100.50 — a bottom last seen in July 2023. Bitcoin, in true crypto fashion, seesawed around $60,000 as traders digested the news. Stocks broadly powered higher with money spinners expressing optimism over lower borrowing costs, which will give more breathing room to the economy and flush it more affordable cash.