Jerome Powell speaks after Fed's interest rate decision announcement
The Federal Reserve on Thursday announced its second straight interest rate cut, cutting its benchmark interest rate by 25 basis points, following economic data showing signs of cooling inflation and the labor market.
The 25 basis point rate cut will keep the benchmark federal funds rate in the range of 4.5% to 4.75%.
The Fed's action follows a larger-than-usual 50 basis point rate cut at its September meeting, the first rate cut since March 2020 and taking interest rates from a range of 5.25% to the highest level since 2001. The rate was lowered to 5.5%.
The Federal Reserve's policy-making arm, the Federal Open Market Committee (FOMC), said, “Labor market conditions have generally eased, and unemployment has increased but remains low. Inflation is the Committee's goal. “We are making progress towards 2%, but it remains high.”
In their announcement, policymakers said they were “attentive to the risks of both the dual mandates” of promoting maximum employment and price stability. All FOMC members voted in favor of the rate cut.
Fed Chairman Jerome Powell said the Fed will adjust interest rate adjustments based on economic conditions. (Photo by ROBERTO SCHMIDT/AFP via Getty Images/Getty Images)
“The economy is doing well overall, and we have made significant progress toward our goals over the past two years,” Fed Chairman Jerome Powell said at a press conference.
“While the unemployment rate is significantly higher than a year ago, it has declined modestly over the past three months and remains low at 4.1%,” Powell said. “Overall, a wide range of indicators suggests that labor market conditions are less tight than they were just before the pandemic in 2019. The labor market is not a source of significant inflationary pressures.”
Regarding the Fed's decision to cut interest rates by 25 basis points (bp), ranging from 4.5% to 4.75%, he said policymakers believe that cutting rates too early could impede inflation, and that lowering rates too soon could hinder inflation. He said he recognized that too much could “unduly weaken economic activity and employment.” ”
“As the economy develops, monetary policy will be adjusted to best promote the goals of maximum employment and price stability. If we don't, we can reduce policy restraint more slowly. If markets weaken unexpectedly or inflation falls faster than expected, we can act more quickly.” did.
When asked about the impact of the election on the Fed's monetary policy decisions and plans for future interest rate changes, Powell said, “In the short term, the election will not affect policy decisions,'' and it is unclear at this point what will happen. he pointed out. Changes in fiscal policy are substantive and therefore their economic impact is uncertain.
“We do not speculate, we do not speculate, we do not assume. As a general rule, any administration's policies or any policies introduced by Congress can have significant economic effects over time.” Pursuing our dual mandate goal '', Powell said, adding that the Fed's models would be used to study economic projections for such proposals.
He then asked whether expectations for a widening fiscal deficit were keeping market interest rates rising, and whether there were concerns about the fiscal deficit increasing. In response, Chairman Powell said, “I have no comment on fiscal policy,'' and “I have nothing further to say about the factors that are causing bond yields to rise.'' He also explained that Congress would study those projections, for example, when considering changes to tax laws that could affect the economy.
Powell was asked by some of President-elect Trump's advisers about whether he would resign as Fed chairman if President Trump asked him to do so, and he answered “no.” In a subsequent follow-up, he was asked if he thought he should step down in response to such a request, and he answered “no.”
This is a developing story. Please check back for the latest information.
