FOMC cuts target for interest rates by another 25 basis points

Rate-setters in the US lowered the target range for official short-term interest rates on Wednesday, arguing that it would help to sustain economic growth and to meet its symmetric target for a rate of consumer price inflation near 2.0%.

But "uncertainties about this outlook remain," the Federal Open Market Committee said in its policy statement following the decision.

"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 added.

The target range for the Fed funds rate was lowered by 25 basis points to 1.50-2.0%.

Notably, perhaps, as Ian Shepherdson at Pantheon Macroeconomics pointed out, the Fed dropped its pledge from the statement to "act as appropriate to sustain the expansion", labelling Wednesday´s Fed decision as a "hawkish ease".

Two FOMC members, Kansas City Fed President, Esther George, and her opposite number at the Boston Fed, Eric Rosengren, voted against the decision to cut rates, preferring instead to keep the previous target range for the Fed funds rate of 1.75-2.0%.

"The statement has changed, with the Fed dropping its previous pledge to "act as appropriate to sustain the expansion" [...] In other words, they think they have done enough for now and that further easings will be contingent on a material weakening in growth and/or inflation. The description of the current state of growth and inflation is little changed from September, and the door remains open if growth tanks in Q4, which we think is an even-money bet," Shepherdson told clients.

"But a rate cut in response to Q4 weakness would come in January, not December; they are done for this year, barring some sort of shock. Next year, the Fed likely will lose the luxury of having to think only about growth, as a combination of base effects, tariff pass-through and wage pressures lift core inflation, but that’s not the story now."