Fedโฃ Slows Tightening, Signalsโค Fewer Rate Cuts ahead
WASHINGTON – The Federalโ Reserve announced itโ will halt the reduction of its asset portfolio on December 1st and signaled expectations for limited further interest rate cuts thisโค year, as policymakers โฃnavigateโ economic uncertainty compounded by the ongoing government shutdown. theโ move marks aโ slowdownโ in the Fed’s tightening policy,initiated โin 2022 to combat inflation.
The โคdecision comes as the central bank grapplesโ with incomplete economic โdata due to the government shutdown, which has frozen or delayed the โคreleaseโฃ of key reportsโ tracking the labor market,โค prices, spending, and other vital indicators. Despite the data โlimitations,โ policymakers recently reviewedโข a delayed consumer price index report showing core inflation rose inโค September atโฃ its slowest pace in three months, though still โคremaining above the Fed’s target at 3% year-over-year.
rate forecasts published last month revealed that nine of 19 policymakersโฃ anticipate no more than one โadditional rate reduction this โyear following last month’s cut, with seven preferring to hold โrates steady through 2025.As โฃ2022, the Fed has reduced โits balance sheet โขby moreโข than $2โค trillion through โthe sale ofโข Treasury bonds and mortgage-backed securities,โ bringing it to underโข $6.6 trillion – its smallest sizeโฃ since 2020. Theseโค asset purchases whereโ initially made to support the โeconomyโฃ following the pandemic, alongside reductions toโค near-zero benchmark interest rates.
The Fed’s actions reflect a delicate balancing act as it attempts to manage inflation โขand support economic growth amidst political and โขeconomic headwinds.
