The US central bank has gone big with its first rate cut in four years

The US Federal Reserve has made its first interest rate cut in four years, and it’s a big one. The bank’s decision to commit to a “double chop” – reducing the key rate of lending by half a point rather than the widely expected quarter point – suggests rate-setters are concerned the US job market is weakening, and wanted to act decisively to stave off recession as inflation slows. The Fed had been under pressure to go big after a decision to hold rates in August catalysed a stock market rout. Yesterday the S&P 500 jumped 1.1 per cent before closing slightly lower, while bond yields dipped – signs of investor confidence in the chosen path. Jay Powell, the Fed chair, said he wasn’t playing catch up: “We do not think we are behind [in cutting rates]. But you can take this as a sign of our commitment to not get behind.” Americans may begin to breathe a sigh of relief as lower rates ripple out into the US economy and beyond, but Powell’s battle isn’t yet won. The decision to cut double was fraught, with one member of the bank’s committee dissenting.