On Thursday, September 18, the Federal Reserve announced a 25-basis-point rate cut, lowering the target range for the federal funds rate to 4.00%-4.25% and resuming the easing cycle paused since December last year. Newly appointed Fed Governor Milan cast a dissenting vote, advocating for a 50-basis-point reduction.
The dot plot indicated that 9 of the 19 officials projected two additional rate cuts by 2025, two anticipated one cut, and six expected no further reductions.
Full Text of the Interest Rate Decision
Recent indicators suggest that economic activity grew at a slower pace in the first half of the year. Job growth slowed and the unemployment rate edged up, though it remains low. Inflation has picked up and remains elevated.
The Committee’s goals are maximum employment and inflation at 2% over the longer run. Uncertainty surrounding the economic outlook remains elevated. The Committee is attentive to risks to its dual mandate and views downside risks to employment as having increased.
To support its stated goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 25 basis points to 4.00–4.25%. In considering whether to make further adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, changes in the outlook, and the balance of risks. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The Committee remains firmly committed to supporting maximum employment and returning inflation to its 2% objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. Should risks emerge that could impede the Committee’s objectives, it stands ready to adjust the stance of monetary policy as appropriate. The Committee’s assessment will incorporate a wide range of information, including labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting in favor of this monetary policy action were Chairman 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, Jeffrey R. Schmid, and Christopher J. Waller. Stephen I. Miran voted against the action, favoring a 50-basis-point reduction in the target range for the federal funds rate at this meeting.
