US interest rates fell to their lowest level since November 2022 at the Federal Open Market Committee’s (FOMC’s) October meeting. Policymakers cut the key federal funds rate by 0.25 percentage points to a range of 3.75% to 4%. This was the FOMC’s second consecutive cut, following a reduction of 25 basis points in September.
- US rates reached their lowest level since November 2022
- US CPI rose to 3% YoY in September
- The US government shutdown has led to a shortage of economic data
As expected, the Federal Reserve (Fed) cut US interest rates by 25 basis points to a range of 4% to 4.25% at the Federal Open Market Committee’s (FOMC’s) September meeting, taking the key federal funds rate to their lowest level since December 2022.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion” (Fed Chair Jerome Powell)
US interest rates fell to their lowest level since November 2022 at the Federal Open Market Committee’s (FOMC’s) October meeting. Policymakers cut the key federal funds rate by 0.25 percentage points to a range of 3.75% to 4%. This was the FOMC’s second consecutive cut, following a reduction of 25 basis points in September.
Federal Reserve (Fed) Chair Jerome Powell cited a “less dynamic and somewhat softer” labour market alongside elevated inflationary pressures. US consumer price inflation rose from 2.9% to 3% year on year in September; although this increase was more muted than expected, it remains well above the Fed’s 2% target.
Committee members voted by ten to two in favour of the cut. One member opted for no change, while another – Stephen Miran, who was appointed in September following his nomination by President Trump – called for a 50-basis-point reduction.
A shortage of data – brought about by the US government shutdown, which began on 1 October – has jeopardised the prospect of further short-term easing. Looking ahead, if the shutdown continues, this lack of data makes it even less likely that Fed officials will continue cutting at their next meeting in December. Chair Powell also described “strongly differing views” among policymakers about how to proceed in December, warning: “A further reduction in the policy rate at the December meeting is not a foregone conclusion – far from it. Policy is not on a preset course.”
