On Wednesday, the Federal Reserve implemented its first interest rate cut since the early days of the Covid-19 pandemic, reducing benchmark rates by half a percentage point. The move is aimed at preventing a slowdown in the labor market.

Amid weakening trends in both employment and inflation, the Federal Open Market Committee (FOMC) decided to reduce the key overnight borrowing rate by 50 basis points (0.5%), aligning with market expectations that had shifted towards a more significant cut.

Excluding the emergency rate reductions during the pandemic, the last time the FOMC made a half-point cut was during the 2008 global financial crisis.

This decision brings the federal funds rate down to a range of 4.75%-5%. While this rate primarily influences short-term borrowing costs for banks, it also affects a variety of consumer loans, including mortgages, auto loans, and credit cards.