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Fed Leaves Key Rate Unchanged, Prepares for Future Cuts
The Federal Open Market Committee decided to maintain the target range for the federal funds rate at 2.25% to 2.5% on Wednesday. The Federal Reserve also indicated it’s prepared to start cutting rates as a way to ensure the economy remains strong in the face of trade conflicts and other threats.
Fed Chair Jerome Powell said, “At the Federal Open Market Committee (FOMC) meeting that concluded today, we maintained our policy interest rate, but made some significant changes to our statement.” Most notably, Powell said in a post-meeting press conference, “Overall, our policy discussions focused on the appropriate response to the uncertain environment. The projections of appropriate policy show that many participants believe that some cut in the federal funds rate will be appropriate in the scenario that they see as most likely.”
The Committee indicated it continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective as the most likely outcomes, but uncertainties about this outlook have increased.
The Fed statement noted, “In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook, and will act as appropriate to sustain the expansion.”
The Fed says the labor market remains strong and that economic activity is rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although, it noted, growth of household spending appears to have picked up from earlier in the year, indicators of business fixed investment have been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2%.
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