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In support of its goals and in light of the shift in the balance of risks, the Federal Reserve decided to lower the target range for the federal funds rate by ¼ percentage point to 3 ¾ to 4%, the lowest level in three years. The move is intended to ease financial conditions amid growing economic softening, even as inflation remains above the Fed’s target.
“Available indicators suggest that economic activity has been expanding at a moderate pace,” the Federal Reserve shared in its released statement. “Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.”
Inflation has eased to around 3 %, down from previous quarters, but is still above the Fed’s 2% goal. The labor market has also shown signs of cooling as job gains have slowed and the unemployment rate has inched up.
To support the labor market, the Fed also announced it will end its active reductions of securities holdings, effective Dec. 1.
