Federal Reserve System (:) Update / Briefing Transcript

Summary of Federal Reserve System Update / Briefing September 17, 2025 Key Points Related to the Federal Reserve and Economic Conditions Economic Growth and Employment - The Federal Reserve noted a moderation in economic activity, with GDP growth at approximately 1.5% in the first half of the year, down from 2.5% the previous year [1][2] - Job gains have slowed significantly, averaging only 29,000 per month over the last three months, with the unemployment rate edging up to 4.3% in August [2][3] - The labor market is experiencing a decline in both supply and demand for workers, leading to increased downside risks to employment [3][6] Inflation Trends - Total Personal Consumption Expenditures (PCE) prices rose by 2.7% over the 12 months ending in August, with core PCE prices increasing by 2.9% [4] - Inflation expectations have increased due to tariffs, but longer-term expectations remain aligned with the Fed's 2% inflation goal [4][20] - The median projection for total PCE inflation is 3.0% for this year, decreasing to 2.6% in 2026 and 2.1% in 2027 [4] Monetary Policy Adjustments - The Federal Open Market Committee (FOMC) decided to lower the policy interest rate by 0.25%, bringing the target range to 4% to 4.25% [5][6] - The FOMC aims to balance its dual mandate of maximum employment and stable prices, adjusting policy in response to evolving economic conditions [5][6] - The median participant in the FOMC projects the federal funds rate to be 3.6% at the end of this year, down from previous projections [8] Risks and Future Outlook - The balance of risks has shifted, with increased downside risks to employment and a more neutral policy stance being adopted [6][16] - The Fed acknowledges the potential for persistent inflation but believes that the current labor market conditions warrant a cautious approach [20][25] - The Fed is committed to monitoring economic data closely and adjusting its policy as necessary to achieve its goals [29][70] Labor Market Dynamics - The Fed highlighted that the slowdown in job creation is largely due to a decline in labor force growth, influenced by lower immigration and participation rates [3][12] - Concerns were raised about the impact of a softening labor market on younger and minority job seekers, who are particularly vulnerable [26][40] Housing Market Considerations - The Fed recognizes that high interest rates have exacerbated housing affordability issues, impacting household formation and wealth accumulation [58][61] - The ongoing housing shortage is identified as a deeper, structural issue that the Fed cannot directly address through monetary policy [61] Conclusion - The Federal Reserve remains focused on its dual mandate while navigating a complex economic landscape characterized by low unemployment, moderated growth, and evolving inflation dynamics [9][70] - The Fed's actions are guided by data and the need to balance risks to both employment and inflation, with a commitment to achieving long-term economic stability [5][70]