Palm Springs, CA

The Federal Reserve made a significant move on Wednesday, implementing its first interest rate cut since the onset of the Covid pandemic. The central bank reduced its benchmark rates by half a percentage point to address a potential slowdown in the labor market.

With both job growth and inflation showing signs of easing, the Federal Open Market Committee opted for a 50 basis point cut, surpassing market expectations that had been leaning towards a smaller reduction. The last instance of such a substantial cut occurred in 2008 during the global financial crisis, excluding emergency cuts made during the pandemic.

This decision brings the federal funds rate down to a range of 4.75% to 5%. While this rate primarily affects short-term borrowing costs for banks, it also influences various consumer loans, including mortgages, auto loans, and credit cards.

Additionally, the committee’s “dot plot” indicates the potential for another 50 basis points cut by the end of the year, aligning with market predictions. Projections suggest a total reduction of about one percentage point by the end of 2025 and an additional half-point in 2026. Overall, the dot plot signals a possible decline of approximately 2 percentage points beyond Wednesday’s action.

The Author, Eric Gray, is a REALTOR®️ with Better Homes and Gardens Desert Lifestyle Properties, CA DRE 02225444.