On Thursday, October 30, the Federal Reserve cut its benchmark interest rate by 25 basis points to a range of 3.75%-4.00%, marking the second consecutive rate cut in line with market expectations. Two committee members dissented, signaling growing disagreement. Kansas City Fed President Schmid opposed the rate cut, advocating for maintaining rates unchanged, while Governor Milan dissented from the decision, arguing for a 50-basis-point reduction.
Additionally, the FOMC statement announced the conclusion of balance sheet reduction on December 1, currently at $50 billion in Treasury securities and $350 billion in MBS per month. Following this, principal payments from maturing mortgage-backed securities will be reinvested in short-term Treasury securities.
Full Text of Interest Rate Decision
Available indicators suggest economic activity is expanding at a moderate pace. Employment growth has slowed since the beginning of the year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these trends. Inflation has risen since the start of the year and remains elevated.
The Committee’s goals are maximum employment and inflation at 2 percent over the longer run. The outlook for the economy remains highly uncertain. The Committee is closely monitoring risks to both aspects of its dual mandate and judges that downside risks to employment have increased in recent months.
To support these objectives and reflecting 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 3.75 percent to 4.0 percent. In considering further adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, changes in the economic outlook, and the balance of risks. The Committee also decided to end the reduction in the total amount of securities it holds effective December 1. The Committee remains firmly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of new information for the economic outlook. Should 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, and the latest developments in financial and international markets.
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 favored lowering the target range for the federal funds rate by half a percentage point at this meeting, and Jeffrey R. Schmid, who favored keeping the rate range unchanged at this meeting.
