US Fed cuts interest rates by 0.25% as inflation persists

08 Nov '24

2 min read

US Fed cuts interest rates by 0.25% as inflation persists

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US Federal Reserve has lowered the federal funds rate by 0.25 percentage points to 4.5–4.75 per cent, aiming to balance maximum employment and 2 per cent inflation.
Despite economic growth and a resilient labour market, inflation remains above target.
Chair Jerome Powell affirmed vigilance on inflation risks.
The Fed will continue reducing its treasury and mortgage-backed securities holdings.

US Federal Reserve has announced a reduction in the target range for the federal funds rate by 0.25 percentage points, bringing it down to 4.5 to 4.75 per cent. This decision reflects the Federal Open Market Committee’s (FOMC) ongoing efforts to balance its dual mandate of fostering maximum employment and achieving long-term inflation at a 2 per cent rate.

Recent data indicates that economic activity has maintained a solid pace of expansion. The labour market, while showing signs of moderation compared to earlier in the year, remains resilient with a low unemployment rate despite a slight increase. Inflation, although progressing towards the Committee’s 2 per cent target, continues to be moderately elevated, the FOMC said in a statement.

The committee emphasised that the economic outlook remains uncertain and reiterated its vigilance regarding potential risks to both its employment and inflation objectives. “We remain committed to taking the necessary steps to ensure that inflation continues its path toward 2 per cent,” stated Jerome H Powell, chair of the Federal Reserve.

As part of this policy shift, the committee will also persist in reducing its holdings of treasury securities, agency debt, and mortgage-backed securities. This strategy aligns with its broader aim to manage inflation while fostering economic growth.

In deliberating future policy measures, the committee will closely scrutinise incoming data and evaluate the evolving economic landscape, ensuring that adjustments align with its primary goals. The statement highlighted that the committee’s approach will consider a variety of indicators, including labour market trends, inflationary pressures, financial conditions, and international developments.

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