The US Federal Reserve reduced its policy rate by 25 basis points, shifting towards a more accommodative approach to support economic stability. The decision aligns with the Fed’s goals of sustainable growth, steady inflation, and maximum employment.
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The United States Federal Reserve has announced a 25 basis point reduction in its policy interest rate, marking a continued shift towards a more accommodative monetary policy stance aimed at supporting economic stability.
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The Federal Open Market Committee (FOMC) lowered the federal funds rate target to a range of 4.5 per cent to 4.75 per cent. This adjustment, according to Fed Chair Jerome Powell, reflects the Federal Reserve’s ongoing commitment to sustainable economic growth, as well as its long-term goal of moving inflation towards the 2 per cent target.
Powell noted, "Today the FOMC decided to take another step in reducing the degree of policy restraint by lowering our policy interest rate by a quarter percentage point," as per ANI. He added, “We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labour market can be maintained with inflation moving sustainably down to 2 per cent.” Powell also indicated that the Federal Reserve would continue to pare down its security holdings as part of its broader economic strategy.
Recent economic indicators reveal solid growth, with a steady yet slightly moderated expansion in labour market conditions. Although the unemployment rate has edged up slightly, it remains relatively low, suggesting that the job market remains generally healthy. Inflation has shown improvement, yet has not fully met the Fed’s target, prompting further policy adjustments to maintain economic balance, according to ANI.
The FOMC underscored its focus on achieving maximum employment and stable, low inflation over the long term. In line with these objectives, the Fed acknowledged certain uncertainties in the economic outlook and the potential risks posed to its employment and inflation goals. As per ANI, the FOMC emphasised its commitment to carefully monitoring incoming data, particularly regarding labour market trends, inflationary pressures, and international developments that could impact the US economy.
Looking forward, the FOMC indicated it would closely assess further changes to the federal funds rate based on evolving economic conditions. This decision would account for various factors, including risks to the Fed’s dual mandate of maximum employment and price stability. The Committee reiterated its dedication to reducing inflation back to the 2 per cent target while supporting maximum employment, affirming it stands ready to adjust its policy if necessary to maintain progress.
As part of its broader objective to stabilise the economy, the Fed will continue reducing its holdings of Treasury securities, agency debt, and mortgage-backed securities, thereby gradually unwinding its balance sheet. Powell emphasised that the Fed’s decisions would weigh employment and inflation data carefully, considering global economic and financial conditions.
The latest rate cut, according to ANI, underscores the Fed’s cautious approach as it aims to foster resilience in the US economy amidst a complex and changing economic landscape.
(With inputs from ANI)
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