Government

Federal Reserve cuts interest rates by a quarter point

By Staff Report, posted 6 months ago
Chair Powell answers reporters' questions at the FOMC press conference on Nov. 7, 2024.  Photo provided by: Board of Governors of the Federal Reserve System 

The Federal Reserve cut its key interest rate Thursday, Nov. 7 by a quarter point citing that recent indicators suggest that economic activity has continued to expand at a solid pace.

“Today, the FOMC decided to take another step in reducing the degree of policy restraint by lowering our policy interest rate by 1/4 percentage point. We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2%. We also decided to continue to reduce our securities holdings. I will have more to say about monetary policy after

briefly reviewing economic developments,” said Chairman of the Federal Reserve Jerome Powell during a press conference. 

The Federal Open Market Committee (FOMC) issued a statement sharing that earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 % objective but remains somewhat elevated.

The statement reads: 

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate. In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/2 to 4-3/4%. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Powell explained that recent indicators suggest that economic activity has continued to expand at a solid pace including factors like the GDP rising at an annual rate of 2.8% in the third quarter, staying about the same as the second quarter, resilient growth of consumer spending and strengthened investments in equipment and intangibles. 

“In the labor market, conditions remain solid. Payroll job gains have slowed from earlier in the year, averaging 104 thousand per month over the past three months. This figure would have been somewhat higher were it not for the effects of labor strikes and hurricanes on employment in October,” said Powell. “Inflation has eased significantly over the past two years. Total PCE prices rose 2.1% over the 12 months ending in September; excluding the volatile food and energy categories, core PCE prices rose 2.7%. Overall, inflation has moved much closer to our 2%longer-run goal, but core inflation remains somewhat elevated. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.” 

In assessing the appropriate stance of monetary policy, the Committee says they will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations and financial and international developments.

You can see the full press conference here and read the full statement here

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