The rate cut, which included a nod to the data limits the central bank faces during the current US federal government shutdown, drew dissents from two policy-makers, with governor Stephen Miran again calling for a deeper reduction in borrowing costs and Kansas City Fed president Jeffrey Schmid favouring no cut at all given ongoing inflation.
The balance sheet decision will as of December 1 keep the total amount of the Fed's holdings steady on a month-to-month basis but shift its portfolio by reinvesting the proceeds of maturing mortgage-backed securities into Treasury bills.
The 10-2 decision to lower the policy rate to a range of 3.75 per cent-4.00 per cent was expected by investors as a way for the Fed to temper any further decline in a job market policy-makers worry may be losing steam.
But Fed members acknowledged the limits in their decision-making process posed by the government shutdown, dating their view of the unemployment rate to August - the month of the last official jobs release - while noting that "available indicators suggest" the economy continued growing at a moderate pace.
Fed chair Jerome Powell will hold a press conference later on Wednesday to discuss the results of the meeting and update his views about an economy that policy-makers say has been giving off contradictory signals, with a strong run of business investment suggesting underlying strength but hiring slowing to a crawl.
Inflation has not risen as strongly as initially expected on the back of US President Donald Trump's new import taxes but nevertheless has climbed from about 2.3 per cent in April to about 2.7 per cent in August, according to the last official estimate released for the Personal Consumption Expenditures Price Index before the shutdown.Â
The Fed uses the PCE to set its 2.0 per cent inflation target, and in projections issued in September policy-makers expected it to rise to 3.0 per cent by the end of this year.
They expect that increase in prices to ease over time while concern about the strength of the job market has increased.
"Downside risks to employment rose in recent months," the Fed said in its new policy statement.
The dissents marked just the third time since 1990 that policy-makers have dissented both in favour of easier and tighter monetary policy at the same meeting.
