The Federal Reserve lowered the upper bound of the federal funds rate to 4.00%, down 25 basis points from 4.25% and in line with expectations. According to the FOMC, balance sheet runoff will cease on December 1. Starting then, all principal payments from maturing Treasury securities will be rolled over at auction, and all principal payments from agency debt and MBS will be reinvested into short-term Treasury bills. https://t.co/w5nQ5YkpIh ...

Summary of Key Points from the Conference Call Industry or Company Involved - The conference call primarily discusses the Federal Reserve's monetary policy and economic outlook in the United States, particularly focusing on employment and inflation risks. Core Points and Arguments 1. **End of Balance Sheet Runoff**: Chair Powell indicated that the Federal Reserve may end its balance sheet runoff in the "coming months," suggesting a shift in monetary policy strategy [2][4][5]. 2. **Downside Risks to Employment**: Powell emphasized that downside risks to employment have increased, which influenced the FOMC's decision to cut interest rates by 25 basis points last month [2][5][7]. 3. **Interest Rate Cuts**: The FOMC is expected to implement further interest rate cuts, with market pricing already reflecting expectations for two additional 25 basis point cuts this year [3][5]. 4. **Liquidity Conditions**: There are signs of tightening liquidity conditions, including a firming of repo rates, which the Committee is monitoring closely [5][7]. 5. **Economic Outlook**: Powell noted that while there was some positive data in the third quarter, the labor market appears less dynamic, with both layoffs and hiring remaining low [5][7]. 6. **Data Collection Issues**: The absence of official employment data due to delays could hinder the FOMC's decision-making process, particularly regarding the upcoming October meeting [7][8]. Other Important but Possibly Overlooked Content 1. **Use of Alternative Data**: The FOMC is considering alternative data sources to supplement the lack of official data, although these are not seen as a replacement for government data [7]. 2. **Cautious Approach**: Powell reiterated the Committee's cautious approach to avoid market strains similar to those experienced in September 2019 [5]. 3. **Impact of Government Shutdown**: The ongoing government shutdown may affect data collection for October, complicating the FOMC's ability to assess economic conditions accurately [7].

Our long stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserves conditions. We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision. Some signs have begun to emerge that liquidity conditions are gradually tightening, including a general firming of repo rates, along with more noticeable but temporary pressures on selected dates.The committee's plans lay out a deliberat ...