Fed cuts benchmark lending rate by 25 bps again

The Federal Open Market Committee (FOMC) cut the federal funds rate by 25 basis points, lowering the target range to 3.50%-3.75%, following quarter-point cuts at the previous two meetings.

Changes to the policy statement were minor, but a subtle change in the phrasing on future rate hikes indicated a more hawkish stance. The amended phrasing "in considering the extent and timing of additional policy adjustments to the target range" indicates a higher threshold for further easing.

The statement also stated that reserve balances had fallen to appropriate levels, and that the Fed will acquire shorter-term Treasury securities as needed to assure a steady supply of reserves.

Along with the decision, the Fed issued an updated Summary of Economic Projections (SEP), which incorporates the median estimates of individual FOMC panelists..

Nine out of twelve FOMC members backed the decision. Stephen Miran again dissented, arguing for a greater 50-basis-point decrease, while Jeffrey Schmid and Austan Goolsbee voted to keep rates constant. The Fed has not had three dissenting votes in a single meeting since 2019.