The Federal Reserve slashed interest rates aggressively Wednesday, announcing the first rate cut since March 2020.

The half-point move paves the way for lower borrowing costs on everything from mortgages to credit cards.

It marks a crucial milestone for the central bank’s historic inflation fight, which kept rates at a bruising 23-year high for more than a year. President Joe Biden acknowledged the Fed’s success at such a critical juncture, saying in a statement on X that “we just reached an important moment.” Meanwhile, stocks seesawed after the decision was announced.

The decision to cut by half a point, which wasn’t unanimous, telegraphs to the world that central bankers feel a sense of urgency to provide the US economy with swift relief from elevated borrowing costs, considering there were blaring calls in recent days for the Fed to kick off the rate-cutting cycle with a bang.

Still, Fed Chair Jerome Powell said in a news conference that the central bank is “not behind” the curve and that the Fed’s decision to cut by half a point is “a sign of our commitment” to not fall behind in responding to the economy’s reality.

Fed Governor Michelle Bowman, who has frequently expressed worries about lingering price pressures, was the lone dissenter, backing a quarter-point cut instead. That was the first dissent from a Fed governor since 2005.

Fed officials also penciled in more rate cuts by year’s end in their latest economic forecasts, compared to the single cut in 2024 that they projected in June. Central bankers also expect unemployment to rise higher this year to 4.4%, up from the current rate of 4.2% as of August.

Despite the Fed’s aggressive action on Wednesday, the central bank’s inflation battle, in the face of immense pressure from Wall Street and politicians, seems to be paying off so far: Inflation is substantially below the 40-year highs seen in the summer of 2022 — all without a recession. The momentous progress seen since then isn’t solely due to higher interest rates, but also because of the US economy’s gradual recovery from severe pandemic disruptions.

The Fed has indeed walked a fine line in taming price pressures without sacrificing America’s job market, an extremely difficult task because rate hikes function by deliberately cooling the economy. That tool wielded by the Fed is typically described as a sledgehammer, not a scalpel.

Still, despite inflation receding, jitters remain, mostly centered around the job market’s future now, rather than the possibility of inflation getting stuck or reigniting. That’s precisely why some called for the Fed to start cutting rates aggressively. The unemployment rate ratcheted up relatively quickly over the past year, though from an unusually low point. Economists have widely said that whenever unemployment begins to rise, it tends to catch momentum and keep rising.

That has put into jeopardy a possible soft landing for the US economy — a scenario in which inflation is tamed without a sharp increase in unemployment. Such an outcome has only happened once in modern history, in the mid-1990s, so the Fed is within reach of a historic achievement.

Here are key takeaways from the Fed’s latest rate decision.

Powell doesn’t think the Fed is playing catch-up

The Fed faced pressure to start cutting rates in July, but did not.

Some investors and economists pointed to rising unemployment and how the job market can sometimes take a turn for the worse on a dime. The central bank was still waiting for enough evidence that inflation had come under control, but Powell had said a weakening job market could speed up the timing of the first rate cut.

The pace of the job market’s slowdown seems to have done the trick. But it also begs the question: Should the Fed have cut rates in July? Clearly, some investors believe the Fed is behind the curve and the decision to cut rates by half a point fueled that fire even more. It’s a tricky predicament for the Fed, and even the fact that the decision wasn’t unanimous casts even more doubt over the soundness of the Fed’s decision-making.

Powell doesn’t agree with that perception. He said the Fed is simply committed to maintaining the labor market’s strength, meaning that officials aren’t trying to put out a fire, but rather shape an insurance policy with their rate cuts. That explanation could appease Wall Street.

“When will investors think the Fed is ahead of the curve and proactively exercising its ‘put’? This is the most important question because investors have been implicitly asking that — and hoping for this outcome — all summer long,” Jason Draho, head of asset allocation, CIO Americas, at UBS Financial Services, said in a recent analyst note. He added that the Fed’s commitment to extending the US economy’s expansion is key for investors’ confidence.

Powell also said that additional jumbo-sized cuts aren’t necessarily coming down the pike, showing that the Fed perhaps isn’t playing catch-up, saying that “I do not think that anyone should look at that and say, ‘This is the new pace.’“

Powell thinks the economy is in good shape

The Fed chief was unequivocal in expressing his optimism about the broader US economy and its outlook, including the job market.

“The labor market is in solid condition, and our intention with our policy move today is to keep it there,” Powell said. “You can say that about the whole economy: The US economy is in good shape. It’s growing at a solid pace, inflation is coming down. The labor market is at a strong pace. We want to keep it there. That’s what we’re doing.”

His characterization squares out with the numbers. Employers have continued to add jobs at a healthy pace and unemployment remains at historically low levels, despite slower momentum recently. But Powell cautioned that the labor market is no longer where it was “on the eve of the pandemic,” which he previously said, but rather that it is “now less tight” than it was in late 2019.

The Fed chief underscored the tough balancing act officials are forced to contend with in trying to finish the job dealing with inflation and preventing a deterioration in the job market, which could be hard to remedy.

The Fed chief addresses the political optics — again

Powell is typically asked about perceptions that the Fed’s decision is being driven by politics, especially with the US presidential election coming up. His response is usually along the lines of the Fed being an apolitical agency that makes its decisions based on the story that economic figures tell.

Former President Donald Trump has said that if he were elected to a second presidential term he would not reappoint Powell — and would even push to have a greater say in monetary policy. Powell said such a shift would be a bad thing for the soundness of the Fed’s decision-making, in response to a question posed by CNN’s Matt Egan.

“Democracies around the world, countries that are like the United States, have independent central banks. And the reason is that people have found over time that insulating the central bank from direct control by political authorities avoids making monetary policy in a way that favors, maybe, people in office as opposed to people who are not in office,” Powell said.

“We do our work to serve all Americans. We’re not serving any politician, any political figure, any cause, any issue, nothing. It’s just maximum employment and price stability on behalf of all Americans.”