Fed Chair Powell on Interest Rates, Inflation, and Economic Outlook

Monetary Policy Decisions

• 🎯 The Federal Open Market Committee decided to lower the federal funds rate by a quarter percentage point to a target range of 3 to 3 and 3/4%.
• ⚖️ This decision reflects a challenging situation with upside risks to inflation and downside risks to employment, requiring a balanced approach to the dual mandate.
• 📉 The rate has been lowered by 75 basis points over the last three meetings, aiming to stabilize the labor market and allow inflation to resume its downward trend toward 2%.

Economic Outlook and Future Policy

• 📊 The Fed is well positioned to determine the extent and timing of additional adjustments based on incoming data, the evolving outlook, and the balance of risks.
• 📈 Monetary policy is not on a preset course and decisions will be made on a meeting-by-meeting basis.
• 🔮 Median projections show the federal funds rate at 3.4% by the end of 2026 and 3.1% by the end of 2027, unchanged from previous projections.

Reserve Management and Market Operations

• 🏦 The committee decided to initiate purchases of shorter-term Treasury securities to maintain an ample supply of reserves.
• 💰 These reserve management purchases will amount to $40 billion in the first month to alleviate near-term pressures in money markets.
• 🛠️ An ample supply of reserves means the federal funds rate is primarily controlled by administered rates, with standing repurchase agreement (repo) operations used to smooth market functioning.

Commitment to Dual Mandate

• 🌟 The Fed remains committed to supporting maximum employment and bringing inflation sustainably down to its 2% goal.
• 🤝 The goal is to keep longer-term inflation expectations well anchored, understanding that actions affect communities, families, and businesses across the country.
• ✅ All actions are in service to the public mission of achieving maximum employment and price stability.