US goes big with first interest rate cut in four years
The US central bank has lowered interest rates for the first time in more than four years with a bigger than usual cut.
The Federal Reserve reduced the target for its key lending rate by 0.5 percentage points, to the range of 4.75%-5%.
Jerome Powell, the head of the bank, said the move was "strong" but that it was needed as price rises ease and job market concerns grow.
It will be a relief to US borrowers, who have been dealing with the highest interest rates in more than two decades.
Wednesday's cut was larger than many analysts had predicted just a week ago, and the bank's forecast signalled that rates could fall another half percentage point by the end of the year.
Federal Reserve chair Jerome Powell said the aggressive action on Wednesday was intended to make sure that high borrowing costs, put in place to fight inflation, would not end up hurting the US economy.
"The labour market is in a strong place - we want to keep it there," Mr Powell said. "That's what we're doing."
The move by the Fed follows cuts by other central banks, including those in Europe, the UK, and Canada and a reduction was widely expected.
But ahead of the meeting there was unusual uncertainty about how large a cut officials would approve.
"Despite there being no significant economic woes on the radar, policy makers have decided to get ahead of the curve," said Isaac Stell, investment manager at Wealth Club, a UK investment service.
"Many may be left wondering what the Fed sees on the horizon to prompt such a bold move."
The Fed raised interest rates sharply starting in 2022, aiming to cool the economy and stabilise prices, which were then surging at the fastest pace since the 1980s.
The moves, which rippled out to the public in form of more expensive mortgages, car loans and other debt, were intended to ease price pressures by reducing spending.
But as inflation, the rate at which prices rise, has subsided, officials have become more concerned about risks to the wider economy from high rates.
The unemployment rate in the US has climbed to 4.2% from 3.7% at the start of the year as hiring slowed.
Projections released after the meeting showed officials now see inflation falling faster and unemployment rising higher than they did in June, with the jobless rate expected to hit 4.4% by the end of the 2024.
Mr Powell said the job market had been too hot last year, and he welcomed some cooling, but he denied that the Fed was worried about the start of a serious slowdown.