In a widely expected decision, the Federal Reserve has cut its benchmark overnight lending rate by a quarter percentage point.
The vote to drop rates by 0.25% passed 11-to-1, placing the country’s key interest rate in a range between 4.00%-4.25%.
President Donald Trump has long been calling on the Federal Reserve and its chair, Jerome Powell, to drop rates. The only dissenting vote in the latest decision was that of newly installed Gov. Stephen Miran, who wanted a more aggressive half-point cut.
The Fed has been reluctant to cut rates over concerns of inflation. However, in the latest statement, the FOMC pointed to a softening job market as one of the factors that led to the decision.
“Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated,” a September 17 FOMC statement read.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the release continued.
The Fed’s so-called anonymous “dot plot” of individual expectations shows a likelihood of two additional rate cuts before the year is out. However, among officials are a wide range of outlooks, with one dot plot pointing to a total of 1.25 percentage points in additional lowering this year, a view likely held by Miran.
“A majority of the FOMC is now targeting two further cuts this year, indicating that the doves on the committee are now in the driver’s seat,” said Simon Dangoor, head of fixed income macro strategies at Goldman Sachs Asset Management, per CNBC.
“We think it would take a significant upside surprise in inflation or labor market rebound to take the Fed off its current easing trajectory.”