The Fed cut interest rates by 25 basis points
At the September meeting, the Federal Reserve announced a 25 basis point cut to 1.75% – 2%, the second rate cut in the year, in line with market expectations.
The Federal Reserve cut interest rates by 25 basis points is basically in line with market expectations, but the FOMC Committee has a clear internal disagreement. The result of the vote was 7:3, 7 people agreed to cut interest rates and 3 people opposed it. The dot chart shows that the Fed will not cut interest rates this year, and analysts also expect the Fed to continue to cut interest rates in the next six months. Influenced by the news, the three major U.S. stock indices fell more sharply, with the Nasdaq index falling by 1%, the Dow once fell nearly 200 points, and the S&P 500 index fell by 0.7%. The dollar index rose, soaring 0.4% to 98.61 in the short run, and spot gold fluctuated sharply in the day, falling 18.4 dollars to 1493.0 dollars per ounce.
The Fed’s interest rate statement showed that information received since the July meeting of the Federal Open Market Committee (FOMC) showed that the labor market remained strong and economic activity grew at a moderate rate rate rate rate rate rate rate rate rate. Average employment growth has been steady in recent months, and unemployment remains low. Although household spending has been growing rapidly, commercial fixed investment and exports have weakened. After excluding food and energy, the overall inflation and inflation rates of other items are lower than 2%, and the long-term inflation expectation indicators based on the survey have hardly changed.
The FOMC Committee seeks to maximize employment and price stability. Given the impact of global development on the economic outlook and the depressed inflationary pressures, the FOMC decided to reduce the target range of the federal funds rate to 1.75% to 2%. The 25-basis-point reduction also supports the Committee’s view that even though economic activity continues to expand and the labour market remains strong, it takes into account the need to achieve 2% inflation. The uncertainties of future growth prospects remain. As the FOMC Committee considers the future path of the target range of the Federal Fund Rate, it will continue to monitor the impact of forthcoming information on the economic outlook and will take appropriate measures to maintain economic expansion, maintain a strong labor market and achieve the 2% inflation target.
In determining the timing and magnitude of future adjustments to the target range of the Federal Fund Interest Rate, FOMC members will assess the full employment situation and the realized and expected economic conditions associated with the 2% inflation target. The assessment will take into account a large amount of information, including measures of labour market conditions, inflation pressure indicators and inflation expectations, as well as the impact on financial and international development.
Members who voted for a 25-point cut in interest rates included Federal Reserve Chairman Jerome Powell, Vice-Chairman John Williams, Commissioner Michelle Bowman, Lael Brainard, Richard Clarida, Charles Evans and Randal Q. Uarles. James Bullard, who opposed the 25 basis points cut, preferred to cut the federal funds rate by 50 basis points to 1.5% to 1.75%, while members Esther George and Eric Rosengren preferred to keep the target rate range unchanged from 2% to 2.25%.
At a press conference following the Fed’s interest rate cut announcement, Powell affirmed that the U.S. economy is growing steadily, the labor market is strong, wage growth is stable, and inflation is moving towards its target. But the uncertainties brought about by the slowdown in global economic growth and the trade situation continue to pose risks to the economy. If the economy turns downward, he said, further interest rate cuts would not be ruled out, but they would still depend on the performance of economic data. He went on to say that if money market pressures increased, the Federal Reserve would have a response tool and would take appropriate action when it needed to keep the economy expanding.