The Federal Open Market Committee lowered the target Federal Funds rate by 25 basis points, to a target of 4.5%-4.75%, citing the progress in inflation and slowing job gains on Thursday.
"Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low," the FOMC statement said. "Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated."
What Has Changed in the New Fed Statement
Here is a detailed comparison of the Fed's current and previous statements, providing enlightening information for your investment choices.
The last time the committee met on September 18, they unanimously voted to lower rates by 50 basis points, starting an aggressive rate reduction policy after they decided the economy was on track. In the lead-up to the U.S. Presidential election, the FOMC's direction of monetary policy looked more uncertain given the unknown effects of either presidential candidate's economic policy goals, and political appointment plans.
The Fed's dot plot graph from September forecasted the median key interest rate ending 2024 at 4.4%, before declining to 3.4% by the close of next year. At the last meeting, nine officials said they should cut rates again this year, and ten said just one more cut would do the trick.
For the target range to meet the 4.4% rate, the Fed would have to cut twice at 25 bps to a range of 4.25-4.5 or a cut of 50 bps or a similar combination of cuts.
In September, the unemployment rate had climbed to 4.3% in July from 3.7% in January. Since then, the most recent unemployment data showed a slight slowdown- numbers released on November 1st showed the rate lowered to 4.1%. PCE inflation, meanwhile, came on October 30th at 2.1% year over year, the lowest since 2021. While Core PCE was still higher at 2.7%, the numbers looked on track for a definite slowdown in prices.
