The Federal Reserve approved its second consecutive interest rate cut Thursday, moving at a less aggressive pace than before but continuing its efforts to right-size monetary policy.
In a follow-up to September’s big half percentage point reduction, the Federal Open Market Committee lowered its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points, to a target range of 4.50%-4.75%. The rate sets what banks charge each other for overnight lending but often influences consumer debt instruments such as mortgages, credit cards and auto loans.
The post-meeting statement reflected a few tweaks in how the Fed views the economy. Among them was an altered view in how it assesses the effort to bring down inflation while supporting the labor market.
“The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance,” the document said, a change from September when it noted “greater confidence” in the process.
Officials have largely framed the change in policy as an attempt to get the rate structure back in line with an economy where inflation is drifting back to the central bank’s 2% target while the labor market has shown some indications of softening. Fed Chair Jerome Powell has spoken of “recalibrating” policy back to where it no longer needs to be as restrictive as it was when the central bank focused almost solely on taming inflation.
“This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move towards a more neutral stance,” Powell said at his post-meeting news conference.