The Federal Reserve cut interest rates by 0.50 percentage points on Wednesday, marking the first rate cut since March 2020. This move was made in an effort to prevent a slowdown in U.S. economic growth.
The rate cut was met with enthusiasm by investors, with stocks on Wall Street soaring on Thursday. The Dow Jones Industrial Average jumped 479 points, or 1.1%, closing at 42,025. The S&P 500 climbed 95 points, or 1.7%, to close at 5,715. The tech-heavy Nasdaq surged 2.5%.
Lower interest rates make it cheaper for U.S. households and businesses to borrow money, which can accelerate spending and investment. They also boost prices for riskier assets such as equities, gold, and cryptocurrencies.
The half-point move signals that the Fed is acting aggressively to keep the U.S. economy from stalling. The rate cut will provide some relief to U.S. consumers struggling with high borrowing rates impacting credit cards, mortgages, and auto loans.
In a press conference on Wednesday, Fed Chair Jerome Powell said, "I don't see anything in the economy right now that suggests that the likelihood of a downturn is elevated — you see growth at a solid rate, you see inflation coming down, and a labor market that is still at very solid levels.