FOMC has 'strongly differing views' about how to proceed in December, says Fed Chair Powell

Core Insights - The current economic environment presents a challenging situation with inflation risks tilted to the upside and employment risks to the downside [1][2] - The Federal Reserve is adopting a balanced approach to address both maximum employment and stable prices, indicating a shift in the balance of risks [2][8] - The decision to cease the reduction of aggregate securities holdings reflects the Fed's assessment that the balance sheet has reached a standard consistent with ample reserve conditions [4][6] Monetary Policy Adjustments - The Federal Reserve plans to hold the size of its balance sheet steady while allowing agency securities to run off and reinvesting proceeds in Treasury bills [7] - The effective federal funds rate has begun to rise relative to the interest on reserve balances, indicating tightening conditions in money markets [5][6] - The Fed's balance sheet has shrunk by $2.2 trillion over three and a half years, reducing its share of nominal GDP from 35% to about 21% [6] Future Outlook - The upcoming December meeting will not necessarily lead to a further reduction in the policy rate, as differing views exist within the committee [4] - The Fed remains committed to achieving its dual mandate of maximum employment and stable prices, emphasizing the importance of these goals for all Americans [8][9] - The normalization of the balance sheet composition is a key focus, with efforts to align the weighted average maturity of the portfolio with that of outstanding Treasury securities [7]