Two weeks ago, the US FOMC reduced the fed funds rate by 25 basis points. At the same time, the Chair of the FOMC emphasised that the US economy remains strong, and that the policy easing should be viewed as a ‘mid-cycle adjustment’. In other words, more of a course correction than a reversal of course.
The FOMC emphasised that it was responding to subdued inflation and the downside risks to the outlook for US economic activity. The FOMC also noted the easing in global growth, reflected most recently in a softening in business investment.