(Finance) – The Federal Reserve has lowered interest rates by 50 basis points in a range between 4.75% and 5%, beating analysts’ expectations for a 25 basis point reduction, although in recent days market bets had been oriented towards a greater cut.
The Fed said recent indicators suggest that economic activity continued to expand at a robust pace. Job growth slowed and the unemployment rate rose but remained low. Theinflation has made further progress toward the committee’s 2 percent goal, but remains somewhat elevated.
The Federal Open Market Committee has “gained more confidence that inflation is moving sustainably towards 2 percent and believes that the risks to the achievement of its employment and inflation targets are roughly in balance.”
In considering further adjustments to the target range, the Committee “will carefully evaluate the incoming datathe evolving outlook and balance of risks” and will continue to reduce its holdings of Treasuries, debt securities and agency mortgage-backed securities.
The Committee stands ready to adjust the monetary policy stance as appropriate if risks emerge that could impede the achievement of the Committee’s objectives – reads the statement released at the end of today’s meeting – The Committee’s assessments will take into account awide range of informationincluding readings on labor market conditions, inflationary pressures and inflation expectations, and financial and international developments.”
In addition to the reduction implemented today, the committee indicated through its “dot plot” the equivalent of another 50 basis points of cut by the end of the year. The matrix of individual officials’ expectations pointed to another full percentage point of cuts by the end of 2025 and half a point in 2026.
FOMC officials raised the unemployment rate forecast at 4.4% this year, from a projection of 4% in the last update in June, and have lowered their outlook for inflation PCE at 2.3% from 2.6% previously. GDP is now seen growing at 2% from 2.1% in June.
Looking ahead to next year, the expectation is for GDP growth of 2%, unemployment rate of 4.4%, PCE inflation of 2.1%. Officials They do not expect inflation to return to their 2% target before 2026..