The Federal Open Market Committee (FOMC) of the US Federal Reserve, led by Fed Chairman Jerome Powell, cut the key rate by 25 basis points on Wednesday. The rate now stands between 3.5 percent and 3.75 percent, the lowest level in nearly three years. “In support of our goals and in light of the change in the balance of risks, the Committee decided to reduce the target range for the federal funds rate by 1/4 percentage point, from 3-1/2 to 3-3/4 percent,” the Fed release said.“Available indicators suggest that economic activity is growing at a moderate pace. Job gains have slowed this year, and the unemployment rate rose through September. Recent indicators are consistent with these developments. “Inflation has increased since the beginning of the year and remains somewhat elevated,” it said.The cut will support the world’s largest economy as the employment situation worsens, although officials are concerned about ongoing inflation as US President Donald Trump’s tariffs hit supply chains.Despite anticipated disagreements among policy officials during the two-day conference, the Federal Reserve was widely expected to implement a third consecutive interest rate cut this week. The market broadly expects another quarter-point rate cut after the Federal Reserve’s Tuesday-Wednesday meeting.“It’s hard to remember a time when the Federal Open Market Committee was evenly divided about the need for additional rate cuts,” said Oxford Economics economist Michael Pearce, referring to the Fed’s rate-setting committee, AFP reported.This divide emerges when higher inflation suggests prudence in rate cuts, while job market risks provide justification for lower rates, he noted in a recent analysis. The recent government shutdown has created additional challenges, as it has resulted in a lack of official employment data for October and November.The Federal Reserve’s decision-making committee consists of 12 individuals with voting rights. It consists of seven governors, the President of the Federal Reserve of New York, and rotating presidents of other reserve banks, who collectively determine interest rate policies through majority voting.The Federal Reserve serves a dual purpose: achieving maximum employment while ensuring price stability. These objectives sometimes conflict with each other. When interest rates are low, economic activity increases, while higher rates generally stifle economic growth and help control inflation.Recent statistical data has indicated a decline in employment figures. The release of current federal statistics was delayed due to the government shutdown from October to mid-November.
