On December 19, the Federal Reserve announced its latest interest rate decision, cutting rates by 25 basis points as expected, lowering the target range for the federal funds rate to 4.25%-4.5%. Cleveland Fed President Loretta Mester cast the dissenting vote, supporting the decision to maintain rates. In the policy statement, the Federal Reserve stated that when considering the extent and timing of any further adjustments to the target range for the federal funds rate, the committee will carefully assess the latest data, the evolving outlook, and the balance of risks.
The latest dot plot indicates two expected rate cuts in 2025, down from four expected in September.
Additionally, the latest summary of economic projections shows that Federal Reserve officials now expect inflation to reach the target level of 2% by 2027, a delay from the previously expected 2026.
Full text of the Federal Reserve policy statement
Recent indicators suggest that economic activity continues to expand at a solid pace. Since the beginning of the year, labor market conditions have generally eased, with the unemployment rate rising but still remaining at low levels. Inflation has made progress toward the committee's 2% target, but still remains slightly elevated.
The committee aims to achieve maximum employment and a long-term inflation rate of 2%. The committee believes that the risks to achieving the employment and inflation goals are roughly balanced. Economic prospects are uncertain, and the committee closely monitors risks that could affect the dual mandate.
To support these objectives, the committee has decided to lower the target range for the federal funds rate by 25 basis points to 4.25%-4.5%. When considering the extent and timing of any further adjustments to the target range for the federal funds rate, the committee will carefully assess the latest data, the evolving outlook, and the balance of risks. The committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The committee is firmly committed to supporting maximum employment and will keep inflation at the target of 2%.
When assessing the appropriate stance of monetary policy, the committee will continue to focus on how the latest information affects the economic outlook. If risks arise that could impede the committee's objectives, the committee will be prepared to adjust the monetary policy stance in a timely manner. The committee's assessment will consider a wide range of information, including labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting in favor of this monetary policy action were: Chair Jerome H. Powell; Vice Chair John C. Williams; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Christopher J. Waller. Opposing this action was Beth M. Harker, who preferred to keep the target range for the federal funds rate between 4.5% and 4.75%.
Article forwarded from: Jin Shi Data