Federal Reserve officials reduced interest rates by a quarter-percentage point for the third time this year and hinted they may now put monetary policy on hold, for one meeting at least.
The Federal Open Market Committee altered language in its statement following the two-day meeting Wednesday, dropping its pledge to “act as appropriate to sustain the expansion,” while adding a promise to monitor data as it “assesses the appropriate path of the target range for the federal funds rate.”
As with the September statement, the FOMC cited the implications of global developments in deciding to lower the target range for the central bank’s benchmark rate to 1.5% to 1.75%.
The tweaks to the statement suggest policymakers are prepared to leave rates on hold for some time and assess the impact on the economy of their reductions over the past three meetings. Chairman Jerome Powell will hold a news conference at 2:30 p.m. with reporters likely to press him to explain the changes.
Powell has said that he didn’t expect an extended series of rate reductions, while describing easing as an effort to provide insurance for an aging economic expansion imperiled by trade tensions and faltering global growth. He hasn’t said, however, how much insurance is enough.
So far, the strategy appears to be working. While lower rates do little to combat the uncertain trade picture, unemployment has continued to drop, consumer spending has remained solid and lower mortgage rates have revived the housing market.
Hours before the decision, the Commerce Department reported the economy grew at a 1.9% annualized pace in the third quarter, beating estimates. The better-than-expected consumer spending was partly offset by weakness in business investment.
The Fed’s cuts have also calmed markets compared to the beginning of the year when investors grew nervous that monetary policy was too tight. Pricing in fed funds futures implies investors don’t fully expect another cut until well into 2020.
The same cannot be said for President Donald Trump, who has repeatedly attacked the Fed. He complained on Tuesday that it “doesn’t have a clue!” He has called on Powell to slash rates to zero while tweeting favorably about negative rates applied by central banks in Europe and Japan.