US Fed Meeting: FOMC Cuts Key Interest Rates By 25 Bps; Jerome Powell Says, "Policy Still Remains Tight"

US Federal Reserve Policy: The FOMC, led by chair Jerome Powell, trimmed key interest rates by 25 basis points while seeking to achieve maximum employment and inflation at the rate of 2%. The FOMC's latest rate decision comes after the US Presidential Election, in which Republican Donald Trump returned to power. During the FOMC press conference, Powell said monetary policy is still tight.

The FOMC decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/2 to 4-3/4 percent. The rate decision aims to achieve maximum employment and inflation at the rate of 2 per cent over the longer run.

It said, " The Committee judges that the risks to achieving its employment and inflation goals are roughly balanced."

"The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," FOMC added.

During the press conference, Jerome Powell stated that FOMC is pursuing rate cuts as monetary policy is still tight. He even added that even with the latest cut, the policy remains restrictive.

Powell stated that they are confident about the economic activity despite the last inflation report coming in higher than expected. He added by December FOMC will have more data to make a decision on rates in the upcoming policy.

In its statement, FOMC said recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low.

"Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated," FOMC added.

For additional al adjustments to the target range for the federal funds rate, FOMC said it will carefully assess incoming data, the evolving outlook, and the balance of risks.

FOMC added it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. They are strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

For the appropriate stance in policy, FOMC said it will continue to monitor the implications of incoming information for the economic outlook.

The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals, it added.

The assessments will take account of a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

The FOMC committee included members like Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller.

In an another development, the Bank of England has also slashed key rates by 25 bps to 4.75%. Bank of England committee also targets 2% inflation, and adopts a medium-term and forward-looking approach to determine the monetary stance required to achieve the inflation target sustainably.

Bank of England said, there has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.