The Federal Reserve has reduced its federal funds rate target range by 25 basis points to 4.5%-4.75%, signaling an openness to pausing further rate cuts in December. Fed Chair Jerome Powell praised the robust performance of the U.S. economy but acknowledged signs of a cooling labor market and inflation data slightly exceeding expectations.
Powell emphasized that the Fed's approach is to make dynamic decisions based on evolving data, balancing the risks of reducing rates too quickly or too slowly. He mentioned that the Fed is gradually moving toward a more neutral stance without a predetermined path. The Fed aims to maintain the economy's strength while controlling inflation towards its 2% target.
During a press conference, Powell reaffirmed the Fed's independence, stating that political influences, including those from the President, would not affect monetary policy decisions. While the recent rate cut maintains a restrictive stance, Powell hinted at a gradual slowing of rate cuts as the Fed approaches a neutral rate.
Future monetary policy adjustments will depend on incoming data, with the Fed ready to adapt its actions to meet the dual mandate of maximum employment and stable prices. Powell expressed confidence in achieving a "soft landing," maintaining strong employment while controlling inflation.
In the market, expectations for a rate cut in January have shifted, reflecting a higher probability of a pause. Analysts speculate that economic policies, such as those related to tariffs and immigration, might influence future Fed actions regarding rate adjustments.
The Fed remains committed to its public mission, responding to economic changes to support employment and price stability for the benefit of Americans. Powell concluded with a commitment to addressing economic uncertainties and risks effectively.
