MNI: FOMC Delivers 25BP Rate Cut, Sees Risks As Balanced
Federal Reserve officials unanimously cut interest rates by a quarter point as expected Thursday, describing risks to their dual mandate of stable prices and maximum employment as balanced and offering no hint on the pace of future moves.
The reduction follows a 50 basis point rate cut in September and brings the federal funds rate target to a 4.5%-4.75% range.
"Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2% objective but remains somewhat elevated," the Fed said in its post-meeting statement.
"The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance."
Investors are still banking on another Fed rate cut in December. Still, a decisive electoral victory this week from former President Donald Trump and the Republican Party has raised concerns about a possible resurgence in inflation, causing some traders to pare back their more aggressive rate cut bets.
The latest FOMC rate cut comes in the wake of mostly strong data on the economy, with even a soft October employment report being mostly written off as related to hurricane and strike effects. GDP grew 2.8% in the third quarter, down from 3.0% in the second quarter but still well above levels policymakers see as reflecting the economy's full potential.
The jobless rate remains historically low at 4.1%, countering worries earlier this year that employment conditions might have been on the verge of a more pronounced deterioration.
Fed Chair Jerome Powell will be facing reporters at 2:30 pm, and will likely be asked not only about the policy outlook but also his own future at the helm of the central bank given Trump's past criticism of the central bank chief he first appointed to the job.
Powell's term ends in the spring of 2026.Since the Fed's September rate cut, long-term bond yields have actually spiked significantly, presenting a quandary for policymakers who had intended to loosen financial conditions rather than tighten them.