Full text of the Federal Reserve's decision: Cut interest rates by 25 basis points and announce the end of balance sheet reduction, with two dissenting votes indicating increased divergence

Source: Jin Ten

On Thursday, October 30, the Federal Reserve lowered the benchmark interest rate by 25 basis points to 3.75%-4.00%, marking a rate cut for the second consecutive meeting, in line with market expectations. Two members voted against, indicating increasing divergence. Among them, Kansas City Fed President Esther George opposed the rate cut and supported keeping rates unchanged; Governor Michelle Bowman disagreed with this rate decision, believing a 50 basis point cut should be implemented.

Additionally, the Federal Reserve FOMC statement announced that it will end the balance sheet reduction on December 1, currently reducing $5 billion in U.S. Treasuries and $35 billion in MBS each month. After that, the principal repayments of mortgage-backed securities will be reinvested in short-term government bonds.

Full Text of the Rate Decision

Available indicators show that economic activity is expanding at a moderate pace. Job growth has slowed this year, and the unemployment rate has risen slightly, but it remains at a low level as of August; more recent indicators are consistent with this trend. Inflation has risen since the beginning of the year and remains relatively high.

The committee's goal is to achieve maximum employment and a long-term inflation rate of 2%. Uncertainty regarding the economic outlook remains high. The committee is closely monitoring the risks to both aspects of its dual mandate and believes that the downside risks to employment have increased in recent months.

To support the aforementioned goals and considering the changing balance of risks, the committee decided to lower the target range for the federal funds rate by 25 basis points to 3.75% to 4%. In considering further adjustments to the target range for the federal funds rate, the committee will carefully assess the latest data, changes in the economic outlook, and the balance of risks. The committee also decided to end the reduction of its total securities holdings starting December 1. The committee is firmly committed to supporting maximum employment and pushing inflation back to the 2% target level.

In assessing the appropriate monetary policy stance, the committee will continue to monitor how new information affects the economic outlook. If risks emerge that could impede the achievement of the committee's goals, the committee will adjust its monetary policy stance as appropriate. The committee's assessment will take into account a wide range of information, including labor market conditions, inflation pressures and expectations, as well as the latest developments in financial and international markets.

Members voting in support of this monetary policy action include Chair Jerome H. Powell, Vice Chair John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller.

Members voting against were Stephen I. Miran, who favored a half-percentage point cut in the federal funds rate target range at this meeting, and Jeffrey R. Schmid, who preferred to keep the rate range unchanged at this meeting.