Fed Cuts Rates, Halts Balance Sheet Runoff

The Federal Reserve cut its policy rate by 25 basis points to 3.75–4.00%, its second reduction this year, citing slowing job gains, a slight rise in unemployment and still-elevated inflation. Policymakers voted 10–2, with Governor Stephen Miran pressing for a larger half-point cut and Kansas City Fed President Jeffrey Schmid preferring no change. The Fed said it will halt further balance-sheet runoff in December and will reinvest the proceeds of maturing securities beginning Dec. 1, including shifting some maturing mortgage-backed-securities reinvestment into Treasuries to ease strains in short-term funding markets and support bank funding. Officials stressed that a December rate cut is not guaranteed amid sharply differing views and added uncertainty from a government shutdown that has limited official economic data and forced reliance on private indicators. Markets reacted nervously to Chair Jerome Powell’s caution about future cuts, though investors still expect possible further easing later in the year depending on incoming data.