News Title:Federal Open Market Committee (FOMC) lowers target range for fed funds rate by 0.5 percentage point to 4.75-5.0 percent
September 18, 2024 – the Federal Open Market Committee (FOMC) decides to lower the target range for the federal funds rate by 0.5 percentage point to 4.75-5.0 percent
The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the FOMC in its statement (see accompanying graphic) on September 18, 2024:
The Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on reserve balances to 4.9 percent, effective September 19, 2024.
As part of its policy decision, the FOMC voted to direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:
Effective September 19, 2024, the FOMC directs the Desk to:
Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4‑3/4 to 5 percent.
Conduct standing overnight repurchase agreement operations with a minimum bid rate of 5 percent and with an aggregate operation limit of $500 billion.
Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4.8 percent and with a per-counterparty limit of $160 billion per day.
Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage‑backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.
Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/2 percentage point decrease in the primary credit rate to 5 percent, effective September 19, 2024. In taking this action, the Board approved requests to establish that rate submitted by the Board of Directors of the Federal Reserve Bank of Atlanta.
Background:
The Federal Reserve (Fed) is the U.S. central bank, created by the Federal Reserve Act of 1913 to establish a monetary system that could respond effectively to stresses in the banking system.
The Federal Reserve System is all the people who work at
the Federal Reserve Board of Governors, a federal agency in Washington, D.C.;
the 12 Federal Reserve Banks, operating around our nation to help ensure all household, community, and business economic conditions and perspectives inform Fed policies, actions, and decisionmaking; and
the 12 voting members from around the System who serve on the Federal Open Market Committee and help set crucial U.S. monetary policy.
The Federal Reserve System performs five key functions that serve all Americans and promote the health and stability of the U.S. economy and financial system. It conducts the nation’s monetary policy, promotes financial system stability, supervises and regulates financial institutions, fosters payment and settlement system safety and efficiency, and promotes consumer protection and community development.
The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of Banks, one Bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Nonvoting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee's assessment of the economy and policy options.
The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
For more information on this announcement, please visit: https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm