The Federal Reserve (Fed) of the United States announced a reduction in the reference interest rate by quarter percentage point (25 basis points), bringing it to the range of 4.5% to 4.75%. In this way, the monetary authority extends its monetary relaxation cycle for the second meeting in a row after the aggressive cut made on September 18when it lowered them by half a point (50 basis points).
The measure responds to an economic context characterized by “solid” growth, according to the central bank, although with certain signs of slowdown in the labor market. However, the organization that directs Jerome Powell continues to see uncertainty on the horizon.
It is the first meeting of the Fed after learning that donald trump returns to the White House. His threat to start a tariff war has triggered the expectations that the Fed will be on alert in the face of inflationary pressures and did not lower rates as much as expected. Powell will give clues about the position the central bank adopts ahead of the next meeting in December and also in the face of the 2025 challenge.
Specifically, the Fed believes that inflationalthough it has shown signs of progress towards the 2% objective, it continues at levels higher than desired. Faced with this situation, the financial institution reaffirms its commitment to balance its two main objectives: full employment and price stability.
“The Recent indicators suggest that economic activity has continued to expand at a solid pace. Since the beginning of the year, labor market conditions have generally improved and the unemployment rate has increased, but remains low”points out the Fed.
The Fed Committee in charge of deciding on monetary policy, the FOMC, reminds once again that it is “prepared to adjust monetary policy stance as appropriate” if risks arise that could prevent the achievement of inflation or employment objectives, a common reference in case you have to change your mind or accelerate your moves in future meetings.
The vote was unanimousunlike the previous decision, in which the first vote against a Fed governor since 2005. This time, the governor Michelle Bowman supported the decision. The September meeting minutes They reflected that slight dissension within the Fed between those who preferred a cut of 25 basis points and those who, like Powell, sought to start the cycle of cuts with a half-point blow, as happened, to convey a message to the market.