The Federal Open Market Committee (Fomc) of Federal Reserve (Fed, the central bank of the United States) announced another reduction in interest rates in the United States by 0.25 percentage points, in a range of 3.50% to 3.75% per year, marking the third reduction this year. The decision was not unanimouswith Jeffrey Schmid and Austan Goolsbee voting in favor of maintaining it, while Stephen Miran advocated a larger reduction of 0.50 percentage points.
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In the statement, leaders say economic activity has grown at a moderate pace, pointing to slowing job creation this year and rising unemployment rates through September. They also note that inflation remains somewhat high, as well as uncertainty about the economic scenario.
“In considering the magnitude and timing of further adjustments to the Fed Funds rate target, the Committee will carefully evaluate the data received, the evolving outlook, and the balance of risks,” the FOMC statement said. Regarding the upcoming meetings, the text indicates that the committee will continue to monitor the data and their implications for the economic outlook and, if necessary, will be ready to adjust monetary policy;
“The committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflationary pressures and inflation expectations, as well as financial and international developments,” the document said.
The Fed also judged that reserve balances had fallen to sufficient levels and announced that it would begin purchasing shorter-term Treasuries.
At 4:30 p.m. (Brasilia time), Fed Chairman Jerome Powell holds a press conference on the decision and investors follow cues on the next steps for monetary policy in the United States.
View the full monetary policy decision here.
Fed inflation projections
The Fed is now considering a more favorable inflation scenario, although it still forecasts a very gradual return of the consumer spending price index (PCE) towards the 2% target.
In the Summary of Economic Projections (SEP) released on Wednesday, the Fed reduced the PCE deflator projection this year from 3.0% to 2.9%; reduce the 2026 index estimate from 2.6% to 2.4%; left the forecast for 2027 at 2.1%; and kept expectations for 2028 at 2.0%. Long term, the projection remained at 2.0%.
Regarding the core PCE deflator, the Fed reduced its estimate for this year from 3.1% to 3.0%; reduced the projection for 2026 from 2.6% to 2.5%; left the estimate for 2027 at 2.1%; and kept the projection for 2028 at 2.0%.
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