The Federal Reserve has cut the federal funds rate by 0.25% and released the latest FOMC forecasts, showing expectations for fewer and slower interest rate cuts through 2027. Despite a solid labor market, the Fed has the flexibility to cut rates gradually given moderate inflation. The dot plot of median Fed member forecasts reveals a modest increase in interest rate projections for 2025, 2026, and 2027, with real GDP growth remaining positive and unemployment expected to improve slightly.
FOMC Cuts Interest Rates, Projects Gradual Recovery
The Federal Reserve (Fed) has announced a 0.25% cut in its benchmark interest rate, the federal funds rate. This move comes after a period of economic uncertainty characterized by escalating trade tensions and slowing global growth.
Background:
The Federal Open Market Committee (FOMC) is the Fed's policy-setting body. It meets eight times a year to determine monetary policy and set target ranges for short-term interest rates. The federal funds rate is the rate at which banks borrow from each other overnight. It serves as a benchmark for other short-term interest rates and influences the cost of borrowing throughout the economy.
Current FOMC Decision:
In its latest FOMC meeting, the Fed voted to cut the federal funds rate from 2.25% to 2.00%. This marks the first rate cut since the financial crisis of 2008. The Fed's decision was supported by a consensus among members that the economy is facing headwinds from global uncertainties and that moderate inflation allows for a gradual easing of monetary policy.
Projected Interest Rate Path:
The Fed's latest economic forecasts, known as the "dot plot," project a slowdown in future interest rate cuts. In 2020, the median forecast of Fed members is for a single additional rate cut of 0.25%. For 2021, the median forecast is for no further rate cuts.
Economic Outlook:
The Fed's forecasts anticipate positive real GDP growth throughout the forecast horizon, with unemployment expected to remain steady or improve slightly. Moderate inflation is also projected, with the Fed's preferred inflation measure (personal consumption expenditures) remaining below its target of 2%.
FAQs:
1. Why did the Fed cut interest rates?
The Fed cut interest rates to provide a monetary policy boost to the economy in the face of global uncertainties and slowing growth.
2. How will this affect borrowers and lenders?
Banks may lower their lending rates in response to the Fed's rate cut, making it cheaper for consumers and businesses to borrow. Conversely, lenders may offer lower interest rates on savings accounts.
3. What does the dot plot predict for future interest rates?
The dot plot suggests that the Fed will slow down the pace of future interest rate cuts, with a single additional cut expected in 2020 and no further cuts in 2021.
4. What are the risks of cutting interest rates?
Cutting interest rates can lead to inflation if the economy overheats. However, the Fed believes that inflation is currently moderate and that the risks of cutting rates are outweighed by the benefits of stimulating the economy.
5. What is the Fed's ultimate goal?
The Fed's dual mandate is to promote price stability and maximum employment. By cutting interest rates, the Fed aims to support economic growth and maintain a stable inflation environment.
In an effort to reduce reliance on China for key minerals used in advanced technologies, India is exploring partnership with a rebel group in Myanmar to secure rare earth samples. The Ministry of Mines has directed state-owned and private companies to collect samples from Kachin Independence Army-controlled mines and test them in domestic labs. This move comes in light of China's recent export restrictions on rare earth magnets, causing disruptions in global supply chains.
Oracle chairman Larry Ellison, who hails from the Bronx, has surpassed Tesla CEO Elon Musk as the richest person in the world with a net worth of $405 billion. This jump in wealth was reported by Barron's on Wednesday, putting Ellison ahead of Musk's net worth of $390 billion. This milestone marks a shift in the top spot amongst the world's wealthiest individuals.
The US Producer Price Index fell 0.1% in August, bucking expectations of a rise and indicating a potential slowdown in overall economic growth. The decline was driven by a slump in the cost of services, particularly within wholesalers and retailers. The news has led to a drop in Treasury yields and solidifies expectations of an interest rate cut by the Federal Reserve next week.
The Hilton Kathmandu, once a symbol of Nepal's ambition and modern design, recently fell victim to violent anti-government protests. The hotel, built by the Shanker Group with a significant investment and featuring luxurious amenities and seismic safeguards, opened in 2024 but tragically, went up in flames a year later. The Hilton was not just a hotel, but a cultural statement, embodying Nepalese heritage and offering breathtaking views of the Langtang range.
In a shocking incident, a brand-new Mahindra Thar crashed through a glass wall and landed on the road below in Delhi's Preet Vihar. The SUV had just been purchased by a couple who were inside the vehicle at the time with a showroom salesman. Fortunately, no one was seriously injured in the accident. The incident, captured on video, has gone viral on social media. Police are investigating the cause of the incident.
Delhi-based manufacturer Vikas Ecotech has acquired an existing Plasticizer Manufacturing Business, valued at Rs 270 million, in an all-cash deal. With this acquisition, the company aims to enhance its product offering and become debt-free by 2023-24. This move comes after the firm recently paid off Rs 101 crore of its debt to lenders.
The Indian Express has obtained information that the Registrar General of India has requested a budget of Rs 14,618.95 crore for the upcoming Census 2027. This will be the first "digital census" and will include the collection of caste data through dedicated mobile applications. The option for self-enumeration will also be provided to the public. Additionally, Indian refiners have saved approximately $12.6 billion in the past three years through their Russian oil imports, which has caused tensions with the Trump administration.
The Trump administration's latest move has caused major disruptions in the Indian export industry with the imposition of 50% tariffs on Indian goods. Sectors such as apparel, textiles, gems, and jewelry will bear the brunt of the higher tariffs, putting low-skilled jobs in India at risk. India's response has been to extend tariff exemptions on cotton imports, but many are criticizing the government for not taking strong action against the US. Political figures like Saurabh Bhardwaj and Akhilesh Yadav have slammed the BJP-led government for its failed foreign and economic policies which are negatively impacting traders, manufacturers, and workers.
The highly anticipated 2025 model of the popular Suzuki Access 125 has finally been unveiled at the Auto Expo. While it comes in three variants and boasts 5 different colour options, there are complaints about the fluctuating mileage and poor design choices such as fixed mirrors. With tough competition in the two-wheeler market, Suzuki may need to offer attractive deals to customers to stay ahead.
At the Plumbex India exhibition, Minister Hardeep S Puri launched the BHARAT TAP initiative, which aims to improve products and services related to plumbing, water, and sanitation. In his speech, Puri emphasized the importance of sanitation in India's development and praised the success of the Swachh Bharat Mission and AMRUT in achieving 100% toilet coverage in rural areas and significant progress in urban areas. He also announced the launch of AMRUT 2.0, with an outlay of Rs. 2,77,000 crores, to further strengthen water and sanitation services in cities.