After cutting interest rates for the first time this year in September, the Federal Reserve on Wednesday announced its widely expected decision to lower interest rates by another quarter point.
The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 3.75 percent to 4.0 percent in support of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.
The central bank once again cited a shift in the balance of risks, noting the downside risks to employment have risen in recent months.
While another quarter point rate cut was widely expected, there was some disagreement among Fed officials.
Recently confirmed Fed Governor Stephen Miran once again preferred a half point rate cut, while Kansas City Fed President Jeffrey Schmid preferred to leave rates unchanged.
Along with lowering rates, the Fed also announced it has decided to conclude the reduction of its aggregate securities holdings on December 1.
Earlier this month, Fed Chair Jerome Powell indicated the central bank may approach a point in “coming months” when it will stop its balance sheet runoff if reserves are somewhat above the level judged consistent with ample reserve conditions.
The Fed reiterated it will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
The central bank’s next monetary policy meeting is scheduled for December 9-10, and another quarter point rate cut had been widely expected before Federal Reserve Chair Jerome Powell’s post-meeting remarks.
Powell said a further reduction in rates in December is “not a foregone conclusion,” noting Fed officials had “strongly differing views about how to proceed” at the final meeting of the year.
Highlighting the high level of uncertainty due to government shutdown delaying key data, Powell also said there’s a “growing chorus” that feels the Fed should “wait a cycle” to continue cutting rates.
Following Powell’s comments, CME Group’s FedWatch Tool indicates the chances the Fed leaves rates unchanged in December have jumped to 33.3 percent from just 9.1 percent yesterday.
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