The US Federal Reserve lowered its base rate by 25 basis points

The regulator acknowledged increased risks for the labor market and maintained its course to return inflation to 2%

The US Federal Reserve System (Fed) lowered its base interest rate by 25 basis points (bp) – to 3.75-4% per annum. This decision was made by the Federal Open Market Committee (FOMC) with the aim of maintaining maximum employment and inflation at 2% in the long term. At the same time, the Committee announced that it would complete the reduction of its total securities holdings on December 1.

The Fed’s statement notes that economic activity continues to grow at a moderate pace, but employment has slowed and unemployment has risen slightly, remaining at a low level. Inflation has risen since the beginning of the year and remains somewhat elevated.

The regulator emphasized that uncertainty about the economic outlook remains high, and risks of a deterioration in the labor market have increased in recent months. The FOMC stated its readiness to adjust monetary policy if new data indicate increased risks to achieving its goals.

“The Committee is firmly committed to ensuring maximum employment and returning inflation to its 2% target,” the Fed said in a statement.

Ten members of the Committee, including Chairman Jerome Powell, voted for the rate cut. Stephen Muran advocated a 50 basis point cut, while Jeffrey Schmid argued for keeping the rate unchanged.

After the announcement, US stock indices rose 0.2-0.6%, while the euro/dollar exchange rate remained close to $1.1641.

In September, the Fed cut the federal funds rate for the first time in nine months, by 25 basis points (bps) to 4-4.25% per annum. Fed officials are forecasting two more rate cuts this year, one of which already happened in October.