Fed Cuts Rates, Halts Balance-Sheet Runoff

The Federal Reserve cut its benchmark federal funds rate by 25 basis points for a second consecutive meeting, lowering the target range to 3.75%–4.00% in a 10-2 vote. Governor Stephen Miran sought a larger half-point cut, while Kansas City Fed President Jeffrey Schmid dissented in favor of keeping rates unchanged. The Fed said it will stop shrinking its balance sheet at the end of November and will reinvest principal payments, rolling maturing agency principal into Treasury bills from Dec. 1, while keeping a $35 billion monthly cap on mortgage-backed securities reinvestments. Policymakers cited growing downside risks to employment, still-elevated inflation, liquidity strains and the complication of a prolonged government shutdown that has suspended some federal economic data. The Fed said the move aims to shore up labor-market and market functioning while leaving open the possibility of further easing amid uncertainty about action in December.