Federal Reserve's Divided Decision: Interest Rate Cut and Liquidity Measures

The U.S. Federal Reserve has cut interest rates by a quarter-point and plans to restart limited purchases of Treasury securities. The decision reflects divisions within the Fed, as two policymakers dissented. Governor Stephen Miran pushed for deeper cuts, while Jeffrey Schmid opposed any cuts, citing inflation concerns.

The U.S. Federal Reserve enacted a quarter-point interest rate cut amid signs of liquidity strain in money markets, aiming to prevent further economic slowdown. This move, which includes limited Treasury securities purchases, faced opposition from policymakers divided over the monetary path due to differing views on inflation.

The decision, effective December 1, maintains the Fed's balance sheets by reinvesting in Treasury bills. The widely anticipated rate cut comes as a strategic attempt to stabilize the fluctuating job market and offset the fallout from recent economic uncertainty during the federal government shutdown.

Despite inflation concerns, highlighted by rising import taxes and modest PCE data increases, Fed Chair Jerome Powell acknowledged the risks to employment and economic growth. He will address these issues in an upcoming press conference, focusing on the economy's mixed signals and underlying business investment strength.

(With inputs from agencies.)