Economy

The Committee lowered the target range for the federal funds rate by a quarter point to 3.75 to 4 percent, its second consecutive cut, and announced it would conclude the runoff of its securities holdings, ending balance-sheet reduction as of December 1. Powell characterized the move as another step toward a more neutral policy stance, taken because downside risks to employment have risen while inflation remains somewhat elevated near 2.8 percent on tariff-driven goods prices. He stressed that a further reduction at the December meeting is not a foregone conclusion, describing strongly differing views on the Committee about how to proceed. The decision drew two dissents in opposite directions, one favoring a larger 50 basis point cut and one favoring no change, which Powell framed as inherent tension between the two sides of the dual mandate. He also noted the labor market is cooling gradually amid a sharp drop in labor supply from lower immigration, and that the government shutdown has delayed official data, which could argue for more caution.

“we judged it appropriate at this meeting to take another step toward a more neutral policy stance”

“A further reduction in the policy rate at the December meeting is not a foregone conclusion”