As expected, the US Federal Reserve delivered a major key rate cut after the meeting of its Federal Open Market Committee (FOMC) on Thursday.

Instead of the highly-anticipated 25 basis point (bps) cut, the US Fed decided to make a 50 bps reduction, also marking the first time in four years that the US central bank made a rate cut.

US Fed Chairman Jerome Powell said that inflation in the United States has “eased substantially,” prompting the rate cut to the range of 4.75% – 5.0%, starting its monetary easing aggressively.

Powell said the rate cut reflects “growing confidence” among the Federal Open Market Committee members that inflation is falling to 2%.

“We’ve been very patient about reducing the policy rate,” he said at a post-meeting news conference. “(While) other central banks around the world cut (interest rates), many of them several times, we’ve waited.

“That patience really paid dividends in the form of our confidence that inflation is moving sustainably toward 2%,” he added.

The US Fed said that upside risks to inflation have diminished and the downside risks to employment have increased. Also, inflation has declined and the labor market has cooled, Powell said.

However, the US Fed chair warned that reducing monetary policy restraint too quickly could hinder progress on lowering inflation. Meanwhile, reducing the policy restraint too slowly could “unduly weaken” economic activity and employment.

Powell added that the “recalibration” of the policy stance will help maintain the strength of the US economy and the labor market, and sustain the progress in combating inflation as the US central bank begins the shift to a more “neutral stance” on monetary policy.

“If the economy remains solid and inflation persists, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond,” he explained.

However, Powell said that another 50 bps reduction should not be expected.

“We’re going to go carefully meeting by meeting and make our decisions as we go,” he said.