The Federal Reserve is taking big steps to fight inflation. Will this fix our economy? And how will these steps impact the election?

From The Epoch Times. The Federal Reserve has cut interest rates for the first time in four years after concluding its two-day policy meeting on Sept. 18.

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Monetary policymakers kicked off their first easing campaign since the onset of the COVID-19 pandemic by lowering the benchmark federal funds rate by 50 basis points, to a range of between 4.75 percent and 5 percent. The decision affects interest rates on credit cards, auto loans, mortgages, and other financial products, as well as savings accounts.

The central bank’s decision to drastically lower interest rates just ahead of November’s presidential election is expected to draw some criticism. …

However, investors had widely expected that the central bank would start the new cycle in an aggressive manner.

“The committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the post-meeting statement from the Federal Open Market Committee (FOMC) reads.

“The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals.” …

As for the broader economy, the Fed stated that recent indicators suggest that economic activity “continued to expand at a solid pace” and employment gains have slowed while the unemployment rate “remains low.”

“Inflation has made further progress toward the committee’s 2 percent objective, but remains somewhat elevated,” the statement reads. …

Is Inflation Fight Over?

Fed Chair Jerome Powell is not declaring victory on inflation just yet, because the primary focus still is keeping inflation stable and preventing the unemployment rate from climbing higher.

“We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation,” Powell told reporters at the post-meeting press conference. …

When asked whether the economy will return to the pandemic-era ultra-low interest rates, he said his sense is that there will not be a return to that economic climate.

“Intuitively, most—many, many people anyway—would say we are probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates, long-term bonds trading at negative rates,” Powell said. …

Market Reaction

U.S. stocks reacted favorably after the super-sized rate cut, with the leading benchmark indexes rising by as much as 0.9 percent.

Short- and medium-term Treasury yields slipped, with the one-month yield tanking by more than 8 basis points, to below 4.85 percent. The benchmark 10-year yield held steady, gaining 2 basis points, to above 3.66 percent.

The U.S. dollar index, a gauge of the greenback against a basket of currencies, plummeted by nearly 0.5 percent to below 100.5. …

The sizable rate cut was part of the central bank’s greater focus “on risks associated with risk management of labor conditions, as the statement noted that inflation has been moving towards the Fed’s target.”

The U.S. economy created a smaller-than-expected 142,000 new jobs in August, and the unemployment rate ticked lower to 4.2 percent. …

Share your prayers for the economy in the comments.

(Excerpt from The Epoch Times)