The Federal Reserve, the U.S. central bank, lowered its benchmark federal funds rate for the third time this year and again said this was due to “the implications of global developments for the economic outlook as well as muted inflation pressures.”
The Federal Open Market Committee (FOMC), the Fed’s policy-making body, cut the fed funds rate by another 25 basis points to 1.50 – 1.75 percent and has now cut it by 75 basis points this year following cuts in July, September and today.
The FOMC largely reiterated its view from September that the labor market remains strong, economic activity has been rising at a moderate rate, and while household spending has been rising at strong pace, business investment and exports “remain weak.”
“This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions and inflation near the Committee’s symmetric 2 percent objectives are the most likely outcomes, but uncertainties about this outlook remain,” the FOMC said, reiterating its statement from September and July.
On both occasions when the Fed cut its rate this year it attributed this to the impact of weak global growth on the U.S. economy along with muted inflation.
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Illustrating the continued split within the FOMC, 8 of its 10 members voted in favor of the rate cut while two members, Esther George and Eric Rosengren voted to maintain the rate, as in September.
The U.S. economy has been slowing in the last two quarters, with real growth in the third quarter today estimated at 2.0 percent year-on-year, down from 2.3 percent in the second quarter and 2.7 percent in the first quarter.
Although overall growth was better than expected, helped by a 2 percent rise in government spending, data showed consumer spending easing to 2.9 percent growth from 4.6 percent in the second quarter and non-residential fixed investment falling 3.0 percent, reflecting the widespread decline in global investments amid uncertainty over trade.
But the jobs market in the U.S. is still healthy, with data today showing private businesses hiring 125,000 workers in October from September’s revised 93,000. In September the U.S. unemployment rate fell to 3.5 percent from 3.7 percent in the previous three months.
As in most of the world, inflation is stable and below central bank targets, with U.S. headline inflation steady at 1.7 percent in September and August, below the Fed’s 2.0 percent target.
The Board of Governors of the Federal Reserve System released the following statement:
