Fed Chair Jerome Powell described the move as ‘risk management’|@federalreserve|X
The Federal Reserve approved a widely expected interest rate cut on Wednesday, after nine months of holding steady, and signaled two more before the end of the year, citing growing risks in the US labor market.
The Federal Open Market Committee voted 11–1 to reduce its benchmark lending rate by a quarter point, setting it at 4.00%–4.25%. Governor Stephen Miran dissented, favoring a deeper cut.
The first rate cut since last year followed the release of government data showing that the US added 22,000 jobs last month. The move means that the central bank is more concerned with the job market, even though inflation remains above the 2% target.
Chair Jerome Powell described the move as “risk management.” He also said the central bank remains committed to its inflation target but acknowledged higher prices could persist until 2028.
Inflation measured 2.9% in August, still above target but far below its 2022 peak of 9.1%.
Who will benefit?
Small businesses and credit card owners can rejoice. The rate cut means lower borrowing costs.
Markets reacted with volatility, with mixed moves in stocks and bond yields. The Dow rose 0.56%, while the S&P 500 and Nasdaq slipped.
The decision comes amid political pressure, with critics questioning the Fed’s independence as labor market weakness, 4.3% unemployment, and stagnant job creation intensify calls for looser policy.