by Ryan McMaken
Mises.org
At its September 2024 meeting, the Fed’s FOMC cut the target federal funds rate by a historically large 50 basis points and then justified this cut on the grounds that “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
The FOMC again cut the target rate in November and then again in December. Each time, the FOMC’s official statement said something to the effect of “[price] inflation is headed to two percent. Specifically, the November statement said “[Price inflation] has made progress toward the Committee’s 2 percent objective.” The December statement said exactly the same thing.
It remains unclear what motivated the FOMC to slice the target rate so drastically in September. Was it a cynical political ploy to stimulate the economy right before an election? Or was the Fed spooked by weak economic data? We don’t know, and the Fed is a secretive organization.