Well within reason: Fed makes first interest rate cut since 2020 [Video]

Rice experts John Diamond and Zach Bethune available to comment

For the first time since 2020, the Federal Reserve announced Wednesday that it will cut interest rates by a half percentage point, bringing the benchmark federal-funds rate to a range of 4.75% to 5%. This decision, supported by 11 of 12 Fed voters, marks a significant shift after a period of aggressive action to combat inflation.

“I think that’s well within reason,” said John Diamond, the Edward A. and Hermena Hancock Kelly Fellow at Rice University. “I think that there were good arguments for 25 and 50 basis points. Personally, I like starting with 50. If you really think the labor market is struggling, there’s no need to mess around and get yourself behind the eight ball any more than you already are.”

The rate cut reflects growing confidence that inflation is steadily declining toward the Fed’s 2% target, while concerns about weakening labor market conditions loom. The …