tl;dr
The Federal Open Market Committee (FOMC) cut its policy rate by 25 basis points to 4.50%-4.75%, marking its second consecutive rate cut. The FOMC expressed awareness of risks to both its employment and inflation goals, with inflation trending towards the 2% target and the labor market showing signs ...
As widely expected, the Federal Open Market Committee cut its policy rate by 25 basis points to 4.50%-4.75% on Thursday, its second rate cut in a row. With inflation, though still elevated, heading toward the Federal Reserve 2% goal and the labor market easing from tight conditions a year ago, "The Committee is attentive to the risks to both sides of its dual mandate," the FOMC said in its statement. Risks to achieving its employment and inflation goals are roughly in balance, it said.
The central bankers aren't necessarily assuring another cut at their next meeting in December. Using language similar to its September statement, when it cut its policy rate by 50 bps at the beginning of its easing cycle, the Fed policymakers said: "In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks." "I see the Fed staying the course and cutting another 25 basis points in December and then pausing as we enter 2025," said David Alton Clark, Seeking Alpha Investing Group Leader of The Winter Warrior Investor.
Fitch Ratings' Chief Economist Brian Coulton pointed out that the FOMC removed the reference to the FOMC "gaining confidence" in inflation moving sustainably towards 2%, as services inflation remains sticky Chair Jerome Powell will likely face questions about how the pending change in administration may affect policy. "With the advent of President-elect Trump’s astounding victory, what Chair Powell states at the presser will be of particular importance," Clark said. "I see Powell playing his cards close to the vest. Powell will sidestep questions regarding future rate hikes and the implications of a Trump presidency’s impact on inflation by saying they are working on a 'recalibration' of policy."
The FOMC will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, it said. That means that tightening through its balance sheet actions is partly offsetting the lower interest rate. Unlike the September decision, in which Federal Reserve Governor Michelle Bowman dissented, this 25-bp cut decision was unanimous.
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