The CPI rose 2.1% in November on a year-on-year basis but the Fed "doesn’t expect inflation to sharply exceed its 2% goal anytime soon."
The sharp downward revision suggests inflation will continue to run below the Federal Reserve’s 2% target.
The banks' diminished ability to supply funding at short notice could have "amplified the repo rate reaction" in September, a report says.
"Inflation needs to accelerate noticeably for the Fed to consider raising interest rates, and that doesn’t appear to be in the cards."
“We took this step to help keep the economy strong in the face of global developments and to provide some insurance against ongoing risks."
The Board of Governors voted 4-1 in favor of the changes, with the dissenter saying they would weaken core safeguards.
The Fed's move to grow its balance sheet comes after last month's “unexpectedly intense volatility” in the funding markets.
Another cut in December is "contingent upon an escalation in trade tensions, further weakness in global growth, and increased geopolitical tensions."
“For the foreseeable future, we’re going to be looking at doing the sorts of things we did the last two days," Fed Chair Jerome Powell says.
The repo operation, the Fed's first since the Great Recession, came after the benchmark federal funds rate rose to the top of its target range.
“The consumer is still very sturdy and providing fundamental strength to the overall economy,” an economist says.
“There are no recent precedents to guide any policy response to the current situation," the Federal Reserve chairman warns.
