By lowering the base interest rate by 25 basis points to the target range of 1.50% -1.75%, the US Federal Open Market Committee commented on its decision and the current situation in the country:
The Fed notes a moderate increase in economic activity and strong labor market positions due to steady average job growth in recent months and a low unemployment rate.
The Fed notes that even though family expenses are growing significantly, the dynamics of the expansion of investments in business structures and export performance still look weak.
The Fed continues to assess long-term inflation expectations as stable. At the same time, calculated on the basis of a 12-month period, total inflation and core inflation, which do not take into account energy and food prices, are below 2%. The compensatory effect on inflation from the markets continues to be carried out to a small extent.
The Fed seeks, in accordance with its authority, to promote maximum employment and price stability. In light of the impact of global events on economic prospects, and also given the moderate inflationary pressure, the Fed decided to lower the target range of the interest rate for federal funds to 1.50% -1.75%. This action confirms the Fed's view that sustained expansion of economic activity, a stronger labor market and inflation close to the symmetric 2% target level indicated by the Fed are the most likely trends. However, uncertainty regarding the realization of these prospects remains. The Fed will continue to closely monitor incoming information and its economic consequences when designing the appropriate trajectory of the target interest rate range for federal funds.
In determining the timing and scale of future regulation of the target interest rate range for federal funds, the Fed will be guided by both the achieved and expected economic progress in comparison with its goals of maximum employment and symmetric inflation at 2%. This approach will be based on a wide range of information, including the parameters of labor market conditions, indicators of inflationary pressures and inflationary expectations, financial and international events.
The current monetary policy framework was adopted by a majority vote (8 vs. 2). The final decision was not supported by the President of the Federal Reserve Bank of Kansas City, Esther George and the President of the Federal Reserve Bank of Boston, Eric S. Rosengren, who proposed at this meeting to maintain the target range of interest rates for federal funds 1.75% -2.00%.
