Fed Cuts Rates by a Quarter Point
The Federal Reserve reduced its interest rate benchmark by a quarter-point for a second time this year on Wednesday, bringing the short-term borrowing rate to a range of 3.75 percent to four percent.
“Available indicators suggest that economic activity has been expanding at a moderate pace. 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 Fed said in a statement at the conclusion of its two-day policy meeting.
The rate cut extends the central bank’s effort to support the labor market after several months of slowing job growth. The decision was widely expected by investors and comes amid a prolonged government shutdown that has delayed the release of major economic reports, leaving policymakers without timely data on employment and inflation trends.
Wednesday’s move lowers the federal funds rate to its lowest level in three years, following an earlier quarter-point reduction in September. The central bank also voted to end the runoff of Treasury securities from its $6.6 trillion balance sheet, halting the process of shrinking its holdings of government debt.
Fed officials face uncertainty about how much further to reduce rates as they balance risks to both sides of their dual mandate. Some policymakers have argued that inflation, which has hovered near three percent, remains too high to justify additional cuts, while others see evidence that the economy is losing momentum and may require more support. (Read more from “Fed Cuts Rates by a Quarter Point” HERE)
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