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Alsharq Tribune-Otaify
The U.S. Federal Reserve on Wednesday decided to lower the target range for the federal funds interest rate by 25 basis points to 3.75 to 4 percent, marking its second rate cut this year.
Available indicators suggest that economic activity has been expanding at a moderate pace, job gains have slowed this year, and the unemployment rate has edged up but remained low through August, the Federal Open Market Committee (FOMC) said in a statement after a policy meeting.
The FOMC, the principal monetary policymaking body of the Federal Reserve System, said it seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
"In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent," the statement said.
"In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," it said.
Of the 12 FOMC members attending the meeting, 10 voted for the 25-basis-point cut, Stephen Miran preferred a 50-basis-point cut, and Jeffrey Schmid preferred no change to the target range for the federal funds rate.
The rate cut comes as the Fed struggles with a paucity of reliable economic data due to the federal government shutdown, which began on Oct. 1.
"The shutdown of the federal government will weigh on economic activity while it persists," said Fed Chair Jerome Powell at a press conference after the policy meeting, admitting that these effects should reverse after the shutdown ends.
Powell cautioned that "a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it, policy is not on a preset course."
Talking of inflation, Powell said inflation was not looking too bad if taking tariffs out of the equation. "Inflation, away from tariffs, is actually not so far from our 2 percent goal."
Luke Tilley, chief economist of Delaware-based Wilmington Trust, expects the Fed to keep cutting rates well into 2026. "Then that would bring them down to what we think of as the neutral range to 2.75 percent to 3 percent."
Franklin Templeton Investments, a global leader in asset management, said that inflation concerns are likely to make the Fed's rate cut range lower than expected and the terminal rate in the current policy cycle may be higher than 3.5 percent.
