Federal Reserve's Full Resolution: Cut interest rates by 25 basis points and announced balance sheet reduction, with some dissenting votes indicating increasing internal divisions

The Federal Reserve has again lowered interest rates by 25 basis points and announced the end of balance sheet reduction on December 1. Two committee members voted against, one supporting no rate cut and the other supporting a 50 basis point cut.

On October 30th, Beijing time (Thursday), the Federal Reserve lowered the benchmark interest rate by 25 basis points to 3.75%-4.00%, marking the second consecutive meeting of rate cuts, in line with market expectations. Two committee members voted against, indicating an increase in divergence. Among them, Kansas City Fed President Esther George opposed the rate cut, supporting the maintenance of the current rate; Governor Michelle Bowman opposed this rate decision, believing that a 50 basis point cut should be made.

Additionally, the Federal Open Market Committee (FOMC) statement announced the end of the balance sheet reduction on December 1, currently reducing $5 billion in U.S. Treasuries and $35 billion in MBS each month. After that, the principal repayments of mortgage-backed securities will be reinvested in short-term government bonds.

Currently, the three major U.S. stock indices maintain an upward trend, with the Dow Jones up 0.22%, the S&P 500 up 0.14%, and the Nasdaq up 0.51%.

Full Text of the Interest Rate Decision

Available indicators show that economic activity is expanding at a moderate pace. Employment growth has slowed this year, and the unemployment rate has risen slightly, but remains at a low level as of August; more recent indicators are consistent with this trend. Inflation has risen since the beginning of the year and remains relatively high.

The committee's goal is to achieve maximum employment and a long-term inflation rate of 2%. Uncertainty regarding the economic outlook remains high. The committee is closely monitoring the risks to both aspects of its dual mandate and believes that in recent months the downside risks to employment have increased.

To support the aforementioned goals and considering the changes in risk balance, the committee decided to lower the target range for the federal funds rate by 25 basis points to 3.75% to 4%. In considering further adjustments to the target range for the federal funds rate, the committee will carefully assess the latest data, changes in the economic outlook, and the balance of risks. The committee also decided to end the reduction of its total securities holdings starting December 1. The committee is firmly committed to supporting maximum employment and pushing inflation back to the 2% target level.

In assessing the appropriate monetary policy stance, the committee will continue to monitor how new information affects the economic outlook. If risks emerge that could impede the achievement of the committee's goals, the committee will adjust its monetary policy stance as appropriate. The committee's assessment will consider a wide range of information, including labor market conditions, inflation pressures and expectations, as well as the latest developments in financial and international markets.

Members voting in support of this monetary policy action include Chair Jerome H. Powell, Vice Chair John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, and Austan D. GoolsbeeMembers who voted against were Stephen I. Miran, who preferred to lower the federal funds rate target range by half a percentage point at this meeting, and Jeffrey R. Schmid, who preferred to keep the rate range unchanged at this meeting