Federal Reserve Chairman Jerome Powell says another rate cut in December is ‘not a foregone conclusion.’
The Federal Reserve cut interest rates for the second straight meeting on Oct. 29 as policymakers take a cautious approach to easing monetary policy.
Officials voted to lower the benchmark federal funds rate—a key rate that influences borrowing costs for consumers and businesses—by a quarter point to a new target range of 3.75 percent to 4 percent.
“Available indicators suggest that economic activity has been expanding at a moderate pace,” the Federal Open Market Committee (FOMC) said in a post-meeting statement.
“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 also announced that it will conclude its balance sheet drawdown on Dec. 1 and begin reinvesting mortgage-backed securities principal payments into treasury bills, or T-bills: short-term securities with maturities of one month to one year.
The committee voted 10–2 for a quarter-point cut. Member of the Fed Board of Governors Stephen Miran preferred a half-point reduction, while Federal Reserve Bank of Kansas City President Jeffrey Schmid did not want to change the policy rate.
Before the meeting, investors had penciled in a 98 percent chance of a 25-basis-point reduction, according to the CME FedWatch Tool.
U.S. stocks had rallied in the days leading up to the October FOMC meeting, with major indexes reaching record highs.
However, markets turned lower after Fed Chairman Jerome Powell signaled at his post-meeting news conference that another rate cut may not happen in December.
“There were strongly different views about how to proceed in December,“ Powell said. ”A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”
The blue-chip Dow Jones Industrial Average reversed its gains during Powell’s news conference, closing down 74.37 points because of uncertainty about the Fed’s December decision.
By Andrew Moran
