In a widely expected move, the Federal Reserve announced today that it would lower interest rates. The move marks the first drop in the federal funds rate in more than a decade and only the fifth rate cut in the last 25 years. The last rate cut occurred in 2008, when the Fed lowered rates to nearly zero following the global financial meltdown.
Market observers had expected the cut, according to a CNBC report. Several Fed officials had hinted they favored a cut, citing weak global growth and softening inflation, according to The Wall Street Journal.
“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2 ¼ percent,” the Federal Open Market Committee, the central bank’s governing body, said in a statement.
Fed officials have also said they want to cut rates while the economy is in relatively good shape, rather than waiting for a downturn to force their hand.
“You don’t need to wait until things get so bad to have a dramatic series of cuts,” Fed Vice Chairman Richard Clarida told Fox Business.