The Fed cuts interest rates by 25 basis points as expected, but deleted the statement about confidence to meet the inflation target

On Thursday, the U.S. Federal Reserve concluded its two-day meeting and announced a 25 basis point reduction in the federal funds rate, lowering it to a target range of 4.50% to 4.75%. This move aligns with market expectations and marks the second consecutive rate cut since September.

 

In its statement, the Fed noted that the U.S. economy continues to expand at a steady pace, with a slight easing in the labor market and unemployment still at low levels. Inflation has made progress toward the Fed's 2% target but remains elevated.

 

The Fed assessed that risks to achieving its employment and inflation goals are balanced, though uncertainties persist, which marks a shift from its September statement, when it expressed "greater confidence" in the process. Moving forward, the Fed will evaluate future data, economic conditions, and risks when considering further rate adjustments. The Fed also plans to continue reducing its holdings of Treasury securities and agency debt.

 

At a press conference, Chairman Jerome Powell emphasized that the Fed’s policy adjustments are intended to support a strong economy and labor market, with the aim of moving toward a more neutral policy stance over time.

 

Despite concerns over potential inflationary pressures from President-elect Donald Trump's policies, Chairman Powell reiterated that the election would not directly affect the Fed’s policy in the near term. "In the short run, the election will have no impact on our policy decisions," Powell said, adding that he would remain in his post even if President-elect Trump requested his resignation.

 

Looking ahead, market expectations, based on CME Group's FedWatch tool, suggest the Fed may implement another 25 basis point rate cut in December, followed by a pause in January to assess the impact of previous tightening measures.