Fed Delivers Normal-Sized Rate Cut, Sees Steady Pace of Further Reductions

• The Federal Reserve (Fed) cut interest rates by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs for the rest of this year, as policymakers responded to concerns about weakness in the job market in a move that won support from most of President Donald Trump's central bank appointees. Only new Governor Stephen Miran, dissented in favour of a half-percentage-point cut.
• The rate cut, along with projections showing that two more quarter-percentage-point reductions are anticipated at the remaining two policy meetings this year, indicates Fed officials have begun to downplay the risk that the administration's voluble trade policies will stoke persistent inflation, and are now more concerned about weakening growth and the likelihood of rising unemployment. The cut, the first move by the policy-setting Federal Open Market Committee since December, lowered the policy rate to the 4.00%-4.25% range.
• In a press conference after the conclusion of the Fed meeting, Chair Jerome Powell said, "In the near term, risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation" for monetary policymakers. He added, "labour demand has softened, and the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant," noting "the marked slowing in both the supply and demand for workers is unusual."
• New economic projections showed policymakers still see inflation ending this year at 3%, well above the central bank's 2% target, a projection unchanged from the last set of forecasts in June. The projection for unemployment was also unchanged at 4.5% and the one for economic growth was slightly higher at 1.6% versus 1.4%.

(Source: Reuters)