Under its muddled mandate of maintaining moderate index inflation and increasing employment through “monetary policy,” the US Federal Reserve claimed the economy continues to “expand at a solid pace” while lowering interest rates by 25 basis points to 4.25/50 percent.
Fed chief Jerome Powell stated, “Recent indicators suggest that economic activity has continued to expand at a solid pace.”
The job market has largely improved since the beginning of the year, and while the unemployment rate has increased, it is still low.
“Inflation is still a little high, but it has moved closer to the Committee’s 2 percent target.”
Following the rate decision, US markets fell precipitously.
The S&P 500 pulled farther from its all-time high established a few weeks ago, down 2.9 percent, well short of its largest loss of the year. The Nasdaq composite fell 3.6 percent, while the Dow Jones Industrial Average fell 1,123 points, or 2.6 percent.
The Fed’s “forward guidance,” which suggests there might only be two rate cuts next year, caused stocks to plummet.
Under Powell, the Fed has made a lot of mistakes. At first, it fired price bubble, arguing that inflation was caused by “supply chain” bottlenecks rather than his surplus liquidity and low interest rates.
The US is expected to enter a recession, according to classical economists who studied changes in the money supply and correctly forecasted inflation.
Below is a reproduction of the entire fed statement:
Over the long term, the Committee aims to attain maximum employment and inflation at a rate of 2 percent. The Committee determines that there is a roughly equal risk of meeting its inflation and employment targets. The Committee is aware of the risks to both sides of its dual mandate, and the economic future is uncertain.
The Committee agreed to reduce the federal funds rate target range by 1/4 percentage point, from 4-1/4 to 4-1/2 percent, in order to achieve its objectives. The Committee will carefully evaluate incoming data, the changing outlook, and the balance of risks when determining the scope and timing of further changes to the federal funds rate target range. The Committee intends to keep cutting back on its holdings of agency debt, agency mortgage backed securities, and Treasury securities. Supporting maximum employment and bringing inflation back to its target of 2 percent are priorities for the Committee.
The Committee will keep an eye on the effects of new information on the outlook for the economy in order to determine the proper stance of monetary policy. If risks materialize that could obstruct the Committee’s objectives, the Committee would be ready to modify the monetary policy stance as necessary. Readings on labor market conditions, inflation pressures and expectations, and financial and global developments are only a few of the many pieces of information that will be considered in the Committee’s evaluations.
