Federal Reserve Interest Rates: Fed again reduced interest rates, know how much and what will be the impact…

Federal Reserve Interest Rates: The US central bank Federal Reserve has cut interest rates by 25 basis points (0.25%). Now interest rates will be between 4.25 percent to 4.50 percent. This is the third time this year that the Fed (US central bank Federal Reserve) has cut interest rates.

Earlier on September 18 and 8, the Fed had cut interest rates by 25 (0.25%) and 50 basis points (0.50%). The cut made in September has been made after almost 4 years. The Fed has cut interest rates after March 2020 in September 2024. Interest rates increased 11 times.

The Fed rate determines how much interest banks will charge each other.

Federal rates determine how much interest banks will charge each other on overnight loans. But it also often impacts consumer loans, mortgages, credit cards and auto loans.

What can be the effect of reducing interest rates?

• Too many cuts could damage America's economic health. Investors may lose enthusiasm.
• A small cut in rates creates disappointment in the market, as the market is expecting a bigger rate cut.
• Delay in cutting interest rates may lead to recession in the job market.
• The policy rate is a powerful tool to fight inflation.

Any central bank has a powerful tool to fight inflation in the form of the policy rate. When inflation is very high, the central bank tries to reduce the flow of money into the economy by increasing the policy rate.