On February 19, 2023, the Federal Reserve announced its latest interest rate decision, lowering the rate by 25 basis points as expected, with the federal funds rate target range dropping to 4.25%-4.5%. Among them, Cleveland Fed President Loretta Mester voted against, supporting the decision to keep rates unchanged. In the policy statement, the Federal Reserve indicated that when considering the extent and timing of any additional adjustments to the federal funds rate target range, the Committee would carefully evaluate the latest data, the evolving outlook, and the balance of risks.

The latest dot plot indicates two rate cuts are expected in 2025, down from four projected in September.

Additionally, the latest economic projections show that Federal Reserve officials now expect inflation to reach the 2% target level by 2027, delaying 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 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 its employment and inflation targets are roughly balanced. Economic prospects are uncertain, and the Committee is closely monitoring risks that may affect the dual mandate objectives.

To support these goals, the Committee decided to lower the federal funds rate target range by 25 basis points to 4.25%-4.5%. In considering the extent and timing of any additional adjustments to the federal funds rate target range, the Committee will carefully evaluate 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 keeping inflation at the 2% target.

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 emerge that could impede the Committee's goals, the Committee will be prepared to adjust the monetary policy stance in a timely manner. The Committee's assessment will take into account a wide range of information, including labor market conditions, inflation pressures and expectations, and financial and international developments.

Voting in favor of this monetary policy action included: Chair Jerome H. Powell; John C. Williams