US goes big with first interest rate cut in four years

The move by the Fed follows cuts by other central banks, including those in Europe, the UK, and Canada.

Ahead of the meeting there was unusual uncertainty about how big a reduction officials would approve.

But economist Randall Kroszner, a professor at the University of Chicago’s Booth School of Business and a former governor of the Fed, said Wednesday’s announcement was significant not because of the size of the cut but because it will kick off a new period of lower borrowing costs.

“One quarter of a percentage point one way or another – that’s not going to break the US economy,” he said. “It’s really where they are headed both for the rest of the year, as well as in the intermediate and longer run.”

Forecasts released by the Fed showed officials expect its key lending rate to drop to about 4.4% by the end of the year and 3.4% by the end of 2025. That is significantly lower than many were predicting as recently as June.