The US Federal Reserve has implemented a 0.25 percentage point cut to its key lending rate, bringing it down to a range of 3.75% to 4%. This decision reflects growing concerns about a slowdown in the labor market, overshadowing existing worries about inflation. The interest rate cut comes amidst a government shutdown that has delayed the release of official job market data, leaving economists without critical insights into employment trends.
This recent rate cut follows a similar move last month, marking the Fed’s first reduction since December. Economists anticipate that this may signal a series of additional cuts aimed at reducing borrowing costs across the country. However, two members of the Fed’s committee opposed the decision; one advocated for a larger cut while the other preferred maintaining the current rates.
The Fed cited a decline in job gains this year, noting a slight increase in the unemployment rate. The ongoing government shutdown has hindered the availability of monthly jobs reports, limiting data access for central bankers. Although private data suggested continued sluggish hiring, such as a report indicating a loss of 32,000 jobs in September, the government has yet to release comprehensive labor statistics.
Inflation remains above the Fed’s 2% target, although recent figures showed a 3% year-over-year increase for September, slightly below expectations. This moderation in inflation allows the Fed to prioritize labor market support over inflation concerns. Wall Street is currently predicting a further quarter-point cut at the Fed’s upcoming December meeting, but potential changes in labor market data could influence this outlook.
Additionally, President Trump has expressed discontent with the Fed’s rate strategy and hinted at the possibility of appointing a new Fed chair before Powell’s term ends next May. Overall, the Federal Reserve’s actions reflect uncertainty regarding the future state of the US economy and the labor market.
Source: https://www.bbc.com/news/articles/c5y0p7g7560o?at_medium=RSS&at_campaign=rss