**Federal Reserve Adjusts Policy with Confidence in Economic Stability**

The Federal Reserve has announced a reduction in the target range of the federal funds rate by 0.5 percentage points, signaling confidence in the U.S. economy's progress toward achieving the dual goals of maximum employment and price stability. This move, decided at the Federal Open Market Committee (FOMC) meeting earlier this month, reflects optimism that labor market strength can be sustained amid moderate economic growth and declining inflation.

Economic indicators demonstrate a solid labor market. The unemployment rate, now at 4.2 percent, remains within the range of its natural rate, while layoffs are low and the labor force participation rate for individuals aged 25 to 54 is near historic highs. An impressive highlight is the participation rate of prime-age women, which continues to reach new all-time records. Real wages are on the rise, aligning with productivity gains, and although the ratio of job openings to unemployed workers has decreased, it remains just above one—indicating more job openings than job seekers, a rare occurrence before 2019.

Despite these positive signs, the labor market has cooled over the past year. Currently, employees perceive jobs as less available than in 2019, contributing to a rise in the unemployment rate to 4.2 percent. However, the Fed believes further cooling in labor market conditions is unnecessary to achieve the 2 percent inflation target.

Headline inflation over the past year stands at 2.2 percent, with core inflation slightly higher at 2.7 percent. Disinflation has been broad-based, bolstered by recent data, with core goods prices decreasing by 0.5 percent, nearing pre-pandemic levels due to eased supply bottlenecks. Core services inflation, excluding housing, has also approached pre-pandemic rates, although housing services inflation is declining more slowly. Encouragingly, growth in rents for new tenants has remained low, which supports the decline in overall housing services inflation.

Overall economic conditions suggest further disinflation is feasible. Balance in the labor market and well-anchored long-run inflation expectations, combined with solid growth and gains in the labor force and productivity, have placed the economy in a favorable position. The Federal Reserve has aimed to restore price stability without the significant rise in unemployment often seen with efforts to combat high inflation, and current progress indicates success toward that goal.

Since the July 2023 meeting, where core inflation was above 4 percent and unemployment was at a near 50-year low of 3.5 percent, notable advancements have been made. Inflation has decreased significantly, and unemployment has increased, leading to the recent policy rate adjustment. The FOMC's decision to lower the policy rate by 50 basis points acknowledges these improvements and the balanced risks to achieving employment and inflation objectives.

Looking ahead, the Federal Reserve emphasizes a flexible policy approach, adjusting as necessary based on incoming data and evolving economic conditions. The goal remains to sustain a robust economy while ensuring maximum employment and price stability. The Fed's commitment to this mission underpins all policy decisions, aimed at serving the public and maintaining economic health.