Full text of the Federal Reserve decision: 25 basis point rate cut and announcement of balance sheet reduction, two dissenting votes indicate growing divisions
The Federal Reserve has cut interest rates by another 25 basis points and announced that balance sheet reduction will end on December 1. Two committee members voted against the decision: one supported no rate cut, while the other supported a 50 basis point cut.
Source: Golden Ten Data
On Thursday, October 30, the Federal Reserve lowered its benchmark interest rate by 25 basis points to 3.75%-4.00%, marking the second consecutive rate cut in as many meetings, in line with market expectations. Two committee members voted against the cut, indicating growing divisions. Among them, Kansas City Fed President Schmid opposed the rate cut and supported keeping rates unchanged; Board member Miran opposed the decision, believing the rate should be cut by 50 basis points.
Additionally, the Federal Reserve FOMC statement announced that the balance sheet reduction will end on December 1, currently reducing $5 billion in U.S. Treasuries and $3.5 billion in MBS per month. After that, principal repayments from mortgage-backed securities will be reinvested in short-term Treasuries.
Full Text of the Interest Rate Decision
Available indicators show that economic activity is expanding at a moderate pace. Since the beginning of this year, job growth has slowed and the unemployment rate has risen slightly, but as of August, it remains at a relatively low level; more recent indicators are consistent with these trends. Inflation has increased compared to the beginning of the year and remains relatively high.
The committee’s goal is to achieve maximum employment and long-term 2% inflation. Uncertainty about the economic outlook remains high. The committee is closely monitoring risks to both sides of its dual mandate and believes that in recent months, downside risks to employment have increased.
To support these objectives and in consideration of changes in the balance of risks, the committee decided to lower the target range for the federal funds rate by 25 basis points to 3.75% to 4%. When considering further adjustments to the target range for the federal funds rate, the committee will carefully assess the latest data, changes in the economic outlook, and the balance of risks. The committee also decided to end the reduction of its securities holdings starting December 1. The committee is firmly committed to supporting maximum employment and bringing inflation back to the 2% target level.
When assessing the appropriate stance of monetary policy, the committee will continue to monitor the impact of new information on the economic outlook. If risks emerge that could impede the achievement of the committee’s goals, the committee will adjust the stance of monetary policy as appropriate. The committee’s assessment will take into account a wide range of information, including labor market conditions, inflation pressures and inflation expectations, as well as the latest developments in financial and international conditions.
Members voting in favor of this monetary policy action included Chair Jerome H. Powell, Vice Chair John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller.
Members voting against were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by half a percentage point at this meeting, and Jeffrey R. Schmid, who preferred to maintain the target range unchanged at this meeting.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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