Fed Cuts Interest Rate By 25bps Amidst Longest U.S. Shutdown
The United States (US) Federal Reserve (Fed) cut interest rates on Wednesday by 25 basis points, the second rate cut in 2025 amid the longest in history federal government shutdown.
Following the October rate cut, the Fed funds rate printed at 3.75% to 4%. The Fed has been under immense pressure from Donald Trump to cut rates despite persistent inflation.
In a statement, the Fed said that the unemployment rate had gone up but remains low. “Job gains have slowed,” the statement reads. “Inflation has moved up and remains somewhat elevated.”
The ongoing federal government shutdown, now one of the longest in US history, has also complicated the Fed’s job. Collection of important economic data has been indefinitely halted.
In its statement, Fed said available indicators suggest that economic activity has been expanding at a moderate pace.
US Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.
The Federal Open Market Committee (FOMC) seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
FOMC noted that uncertainty about the economic outlook remains elevated and Fed said it is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.
In support of its 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 1/4 percentage point to 3-3/4 to 4 percent.
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.
The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly 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 incoming information for the economic outlook.
The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; 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.
Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.
Regulatory Crossfire: CBN’s Foray into FIM Oversight Erodes SEC Authority
