Fed FOMC Policy Decision: Federal Reserve Chairman Jerome Powell on Wednesday announced a reduction of 25 basis points in the United States’ key lending rate — known formally as the federal funds rate — as widely expected by economists. After the latest policy action, the benchmark interest rate in the world’s largest economy stands adjusted to 4-4.25 per cent from 4.25-4.5 per cent, amid a weakening jobs market, moderating inflation and persistent uncertainties emanating from the Trump 2.0 administration’s tariffs in the US economy.
Dow zooms after Fed delivers as widely expected
Wall Street indices built on intraday gains after the announcement of the Fed policy decision.
The Dow Jones Industrial Average (DJIA) — one of the three main American equity benchmarks — surged as much as 504.1 points, or 1.1 per cent, to 46,262 minutes after the news.
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The outcome of the FOMC’s fifth scheduled review of the year is tracked closely by investors globally to gauge possible cues and scope for interest rates in other major economies, including India.
Here are key takeaways from the Fed’s much-awaited September policy statement:
The US central bank pointed out that economic activity growth has moderated in the first half of the year, with slower job additions, a low unemployment rate and elevated Inflation.
The FOMC’s focus, said the Fed, is on achieving maximum employment and inflation at the rate of 2 per cent over the longer run, amidst “elevated uncertainty” about the economic outlook.
It also said that it remains “attentive to the risks to both sides” of its dual mandate of ensuring maximum employment while maintaining price stability.
Going forward, the FOMC will “carefully assess incoming data, the evolving outlook, and the balance of risks”, noted the Fed.
It also said that the panel will continue to reduce its holdings of Treasury securities as well as agency debt and agency mortgage‑backed securities, while remaining “strongly committed to supporting maximum employment and returning inflation” to its objective.
Its assessments will take into account “a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments”, wrote the Fed in its policy statement dated September 17.
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The US central bank’s FOMC — its rate-deciding panel headed by the Fed Chair — meets eight times a year for scheduled reviews, and convenes additional meetings for financial emergencies like the pandemic.
