US Federal Reserve Cuts Interest Rate For Second Consecutive Time, Powell Says Not In 'Pre-Set' Course

The US Federal Reserve on Friday cut its benchmark interest rate for the second time in a row, in line with market expectations and official projection.

The Federal Open Market Committee reduced the federal funds rate target by 25 basis points to between 4.50% and 4.75% at the conclusion of its two-day meeting. The decision was based on consensus.

The FOMC statement said US labour market conditions have "generally eased" since earlier in the year and the unemployment rate has moved up but remains low. "Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated."

The Jerome Powell-led committee sees risks to achieving its employment and inflation goals "roughly in balance," even as the economic outlook is uncertain.

In September, the FOMC lowered the rate by 50 basis points to a range of 4.75%-5.00%, marking its first cut in over four years. The central bank had maintained its key interest rate unchanged for eight consecutive meetings until July, when it increased the rate by 25 basis points, reaching a 22-year high.

At that time, the Fed's dot plot—a chart that records each official's projection for the central bank's key short-term interest rate—priced a cut of 1 percentage point by year-end. This implied two more quarter-point cuts or one larger, half-point cut in the remaining meetings.

The US central bank will meet again on Dec. 17-18.

Jerome Powell said he acknowledged that lowering rates too quickly could hinder progress in getting inflation in the US down. Similarly, cutting rates too slowly “could unduly weaken economic activity and employment". "We are not in a pre-set course," the Fed Chair asserted.

He referred to the rate cut as a "further recalibration" of the Fed’s policy stance. Officials had previously described the September cut as an adjustment to a more suitable policy position, given that inflation has significantly decreased and the labor market is no longer overly tight.

When asked about impact of the US election outcome which puts Donald Trump back into the presidency, Powell said in the near term, the election "will have no effect" on Fed decisions. "We don’t know what the timing or substance of economic policy changes going forward," he said, adding the central bank isn’t going to guess or assume what’s going to happen.

Trump has pledged to cut corporate taxes while raising tariffs on all imports into the country, the former seen as charging economic growth and the latter inflationary.

Get all the live updates on US Fed meeting here.