The United States (US) central bank, The Federal Reserve (The Fed), again cut its benchmark interest rate by 25 basis points (bps) to 4.50-4.75% on Thursday US time or early Friday morning Indonesian time.

This 25 bps cut is the second time the Fed has carried out this in two consecutive Federal Open Market Committee (FOMC) meetings. Previously, the Fed cut interest rates by 50 bps last September. Thus, the Fed's interest rate has been cut by 75 bps.

As is known, the Fed raised interest rates by 525 bps from March 2022 to July 2023. They then held interest rates at the level of 5.25-5.50% in September 2023-August 2024 or more than a year

In its statement, the Fed explained that it cut interest rates because it believed US inflation was moving towards its target range of 2%.

"The unemployment rate is rising but remains low. Inflation has shown progress towards the 2% target but remains at a fairly high level," wrote the Fed on their official website.

For the record, US inflation has slowed down to 2.4% (year on year/yoy) in September 2024. The unemployment rate reached 4.1% in September 2023. The unemployment rate even touched 4.3% in July 2024, which is a record high since October 2021.

No More Pruning?

After the 75 bps cut, the market is now wondering whether the Fed will not cut interest rates again at its December meeting. However, some still believe that the Fed will cut interest rates by 25 bps in December and hold them in January 2025.

"The Fed's 25 bps rate cut is more related to long-term trends. Overall, we expect a full 100 bps cut this year and another 100 bps next year so that it could lower interest rates on car loans, mortgages, credit cards," said Christopher Clarke, economics professor at Washington State University, told CBS News.

Analysts from Capital Economics predict that the Fed will lower its benchmark interest rate by 25 bps at each subsequent meeting, with interest rates reaching their lowest point in May between 3.50%-3.75%. I myself hope for a reduction in interest rates. ;)