Federal Reserve System (FED) FOMC Meeting summary

Monetary policy decisions and outlook

• Policy interest rate lowered by 25 basis points, bringing total cuts to 75 basis points since September and 175 basis points since last September, positioning rates within a broad range of neutral estimates.

• The target range for the federal funds rate was lowered to 3.5–3.75%, with the interest rate on reserve balances reduced to 3.65% and the primary credit rate to 3.75%.

• Committee will assess the extent and timing of further adjustments based on incoming data, with no preset course for future moves.

• Reserve management purchases of Treasury bills initiated to maintain ample reserves, with $40 billion planned in the first month and a seasonal buildup ahead of tax season.

• Open market operations will maintain the new target range, with ongoing purchases of short-term Treasury securities as needed.

Economic conditions and projections

• Real GDP projected to rise 1.7% this year and 2.3% next year, with growth supported by resilient consumer spending, business investment, and AI-related expenditures.

• Economic activity is expanding moderately, with slower job gains and a higher unemployment rate through September.

• Labor market is gradually cooling, with unemployment rising to 4.4% and job gains slowing, partly due to lower labor force growth and participation.

• Productivity growth has been structurally higher, possibly due to technology and AI, allowing for higher GDP growth without significant job creation.

• Housing sector remains weak, with affordability challenges and structural supply shortages limiting the impact of rate cuts.

Inflation and risks

• Inflation remains above the 2% target, with total and core PCE prices up 2.8% over the past year; most of the current overshoot attributed to goods inflation driven by tariffs.

• Median SEP projection for PCE inflation is 2.9% this year, 2.4% next year, and 2% thereafter; inflation from tariffs expected to peak in the first quarter of next year and then subside if no new tariffs are announced.

• Near-term inflation expectations have declined, and longer-term expectations remain anchored at 2%.

• Committee views the inflation risk as primarily from goods, while services inflation is easing; policy aims to prevent one-time tariff effects from becoming persistent inflation.

• Uncertainty about the economic outlook is high, with increased downside risks to employment.