Key Takeaways:

• Interest rate lowered by 25 basis points to 3.75%-4.00%.
• Division within the FOMC with dissenting votes against the rate cut.
• Balance sheet runoff to end on December 1st.
• Focus on achieving maximum employment and 2% inflation target.

The Fed's Rate Cut Decision:

On Thursday, October 30th, the Federal Reserve decided to lower its benchmark interest rate by 25 basis points, bringing the target range to 3.75%-4.00%. This marks the second consecutive meeting in which the Fed has cut rates, a move widely anticipated by financial markets.

Internal Dissent Surfaces:

Despite the majority consensus on the rate cut, two dissenting votes emerged, reflecting a division within the Federal Open Market Committee (FOMC). Kansas City Fed President Jeffrey Schmid voted against the cut, favoring keeping interest rates unchanged. On the other hand, Stephen Miran, a board member, dissented, believing that interest rates should have been cut by 50 basis points.

Ending Balance Sheet Reduction:

In addition to the interest rate decision, the FOMC announced that it would end its balance sheet runoff on December 1st. Currently, the Fed is reducing its holdings of Treasury securities by $5 billion per month and mortgage-backed securities (MBS) by $35 billion per month. After this date, principal payments from mortgage-backed securities will be reinvested in short-term Treasury bills.

FOMC Statement Highlights:

The statement released by the FOMC indicated that economic activity is expanding at a moderate pace. While job growth has slowed this year and the unemployment rate has edged up slightly, it remains at a low level as of August. The statement also noted that inflation has increased since the beginning of the year but remains relatively elevated.

Committee Objectives:

The Committee's objectives are to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainties about the economic outlook remain. The Committee is closely monitoring the risks to achieving these goals and believes that downside risks to employment have increased in recent months.

Assessment of Future Monetary Policy:

The Committee affirmed that it will continue to monitor incoming information and assess its implications for the economic outlook. If risks emerge that could impede the attainment of the Committee’s goals, the Committee will adjust the stance of monetary policy as appropriate. The Committee’s assessments will take into account a wide range of information, including labor market conditions, inflation pressures and inflation expectations, and financial and international developments.