Indicating that, despite some uncertainties in the outlook, economic growth in the United States is rising moderately and the labor market remains strong, the FOMC decided to further reduce the federal funds rate.
Based on information it has received since it last met in mid-September, the Federal Open Market Committee decided (in an 8–2 vote) to reduce the target range for the federal funds rate to a 1.50 to 1.75-percent level. Further, noting global developments and "muted inflation pressures," the Committee will "continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate," the FOMC stated.
Economic outlook. The FOMC reported that although household spending "has been rising at a strong pace," business fixed investment and exports "have weakened." At the same time, the labor market "remains strong," job gains have been "solid, on average, in recent months," and the unemployment rate has "remained low."
In addition, on a 12-month basis, overall inflation and inflation for items other than food and energy "are running below 2 percent," the Committee said. Meanwhile, market-based measures of inflation compensation "remain low," and survey-based measures of longer-term inflation expectations "are little changed." The FOMC continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2-percent objective as the most likely outcomes, "but uncertainties about this outlook remain."
Federal funds rate. In keeping with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the FOMC, in an 8 to 2 vote, decided to reduce the target range for the federal funds rate (from the prior 1.75- to 2.00-percent level) by 25 basis points to a new 1.50- to 1.75-percent level. Voting against this latest action at the FOMC meeting were Esther L. George and Eric S. Rosengren, who preferred to maintain the previous target range.
In connection with future determinations of the timing and size of an adjustment to the target range, the Committee "will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective." According to the FOMC, this assessment "will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments."
Primary credit rate. The primary credit "discount" rate is the interest rate charged for short-term credit extensions to depository institutions. As reflected in its Oct. 30, 2019, "Decisions Regarding Monetary Policy Implementation," the Federal Reserve voted unanimously to approve a 0.25 percentage point decrease in the primary credit discount rate to the 2.25-percent level, effective Oct. 31, 2019. In taking this action, the Fed approved requests to establish the new rate submitted by the Boards of Directors of the Federal Reserve Banks of Minneapolis and San Francisco.
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