The Federal Reserve announces another interest rate cut, Powell says further cuts in December are not a certainty

Washington, October 29 (Xinhua) -- The Federal Reserve announced on the 29th that it will once again lower its target range for the federal funds rate by 25 basis points to between 3.75% and 4.00%. Federal Reserve Chairman Powell stated on the same day that further interest rate cuts at the Fed's December monetary policy meeting are not a certainty.

The Federal Reserve Board concluded its two-day monetary policy meeting on the same day. The Federal Open Market Committee, its decision-making body, issued a statement after the meeting saying that existing indicators show that US economic activity has been expanding at a moderate pace, with job growth slowing down this year, unemployment slightly rising, inflation rising since the beginning of the year, and currently still at a relatively high level. Given the change in risk balance, it has been decided to lower the target range for the federal funds rate by 25 basis points.

The statement said that the Federal Open Market Committee will carefully evaluate the latest data, constantly changing economic outlook, and risk balance when considering further adjustments to the target range of the federal funds rate. If there are risks that may hinder the achievement of the goal, the monetary policy stance will be adjusted at any time as appropriate.

This is the fifth time the Federal Reserve has cut interest rates since September 2024, following a 25 basis point rate cut on September 17th. Out of the 12 members of the Federal Open Market Committee, 10 voted in favor of a 25 basis point rate cut, with Stephen Milan leaning towards a 50 basis point rate cut and Jeffrey Schmid leaning towards keeping it unchanged.

Powell said at a press conference after the monetary policy meeting that "the federal government shutdown will continue to put pressure on economic activity. However, these impacts will 'reverse' after the 'shutdown' ends.

The government shutdown has caused delays in the release of multiple official economic data, and data released before the shutdown showed that the growth momentum of US economic activity may be stronger than expected. Powell therefore stated that further interest rate cuts at the Federal Reserve's December monetary policy meeting are not a certainty, and the situation is "far from that".

The Federal Reserve has been caught in a dilemma between stabilizing prices and achieving full employment in recent times. Cutting interest rates too quickly or too early may accelerate inflation; Maintaining restrictive interest rates for too long may further weaken the job market. Powell emphasized at the press conference that there is no absolutely safe path for the Federal Reserve's policy-making in balancing these two objectives.

Analysts believe that although the US inflation rate is still far above the Fed's 2% target, employment has become the focus of the Fed's attention. Morgan Stanley predicts that the Federal Reserve will continue to cut interest rates until January 2026, with two more cuts in April and July 2026, ultimately lowering the target range for the federal funds rate to 3.00% to 3.25%. Franklin Templeton Investments predicts that inflation concerns will lead to lower than expected interest rate cuts by the Federal Reserve, and the final target range for this round of policy rates may be higher than 3.5%.