Background on the Federal Reserve and Its Decision-Making Process
The Federal Reserve, the central bank of the United States, has decided to cut interest rates on federal funds by a quarter percentage point for the second time this year. The move brings the interest rate range down to between 3.75% and 4%. However, the absence of employment data for October was caused by the federal government shutdown, preventing the release of job figures.
The Current Economic Landscape
Despite the lack of recent employment data, the Federal Open Market Committee (FOMC) acknowledged that job growth has slowed this year, and unemployment has risen, though it remained low until August.
Dissenting Voices Within the Federal Reserve
For the first time since 2019, there were two dissenting votes against the interest rate cut. Jeffrey Smith, head of the Federal Reserve Bank of Kansas, voted against the change as he preferred not to adjust rates. The other dissident was newly appointed economist Stephen Miran, who is on leave from the White House Council of Economic Advisors. Miran supported a larger rate cut, at least by half a percentage point.
Looking Ahead: The December Meeting
The recent interest rate cut has sparked speculation about the upcoming FOMC meeting, scheduled for December 9-10. However, Federal Reserve Chair Jerome Powell emphasized that there were “strong differing views” on the committee’s next steps and stressed that no decision had been made.
Inflation and Employment Concerns
Powell also reiterated that with inflation moving away from the target and job growth slowing, “there is no risk-free path.”
Key Questions and Answers
- What is the Federal Reserve’s recent decision regarding interest rates? The Federal Reserve cut interest rates on federal funds by a quarter percentage point for the second time this year, bringing the range down to between 3.75% and 4%.
- Why was there a delay in releasing employment data for October? The federal government shutdown prevented the release of job figures for October.
- What are the differing views within the Federal Reserve? There were two dissenting votes against the recent interest rate cut. Jeffrey Smith, head of the Federal Reserve Bank of Kansas, voted against it, preferring not to adjust rates. Stephen Miran, a newly appointed economist on leave from the White House Council of Economic Advisors, supported a larger rate cut.
- What concerns does the Federal Reserve have regarding inflation and employment? With inflation moving away from the target and job growth slowing, Federal Reserve Chair Jerome Powell acknowledged that “there is no risk-free path.”
As an international analyst and consultant, former director of the UN Economic Commission for Latin America and the Caribbean (ECLAC) office in Washington, I have commented on economic and financial matters for CNN en Español TV and radio, TELEMUNDO, UNIVISION, and other media outlets.
