Fed's balancing act: Why this rate-easing cycle will be different

Since the US economy is not in distress, lower interest rates may increase spending relatively quickly. Also, Mr Powell termed the cut a calibrated attempt to take the policy rate to the neutral rate

The US Federal Reserve (Fed) did not want to be wrong again. After misreading the inflation surge following the pandemic, it wants to ensure a soft landing for the US economy. The unemployment rate increased to 4.2 per cent in August, as against 3.8 per cent a year ago. Consequently, the Federal Open Market Committee (FOMC) of the Fed on Wednesday decided to reduce the target range for the federal funds rate by 50 basis points to 4.75-5 per cent. The US central bank raised policy interest rates 11 times starting early 2022 to the highest level