URGENT: Fed cuts rates for third, final time this year
The US Federal Reserve has cut interest rates by a quarter point on Wednesday, bringing down the cost of borrowing for Americans for the third time this year.
Signs of Solid Economic Growth, Easing Labour Market
In its last policy meeting for 2024, Fed announced a quarter-percentage-point reduction in the target range for the federal funds rate, bringing it to 4.25 per cent–4.5 per cent. The US central bank attributed its decision to the recent economic indicators showing continued solid expansion in economic activity, alongside a slight easing in labour market conditions. Although inflation has made progress toward the Fed’s 2 per cent target, the central bank said it remains somewhat elevated, prompting the Committee to take a cautious yet proactive approach.
The Federal Open Market Committee (FOMC) emphasised its commitment to achieving its dual mandate of maximum employment and stable inflation over the long term. While acknowledging risks to both employment and inflation, the Committee stated that these risks are “roughly in balance.” However, it flagged uncertainty in the economic outlook and reaffirmed its readiness to adjust monetary policy as necessary.
Chair Jerome Powell and the majority of the FOMC supported the rate cut, citing the need to support economic growth and bring inflation closer to its target. The Committee also reiterated its ongoing efforts to reduce holdings of Treasury securities and mortgage-backed assets, signaling continued tightening in other areas of monetary policy.
Who Opposed Rate Cut Decision
The decision to lower rates was not unanimous. Beth M. Hammack cast the sole dissenting vote, favouring a higher target range of 4.5 per cent–4.75 per cent. Hammack’s dissent highlights ongoing debates within the Fed over the pace and scale of adjustments to interest rates amid evolving economic conditions.
In a statement, the Committee underscored that future rate decisions will be informed by a range of factors, including labour market conditions, inflation trends, and international developments. Powell and his colleagues stressed their strong commitment to returning inflation to the 2 per cent objective while maintaining economic stability.
Attribution: Fed
