{"id":341705,"date":"2025-10-29T22:19:09","date_gmt":"2025-10-29T22:19:09","guid":{"rendered":"https:\/\/www.europesays.com\/us\/341705\/"},"modified":"2025-10-29T22:19:09","modified_gmt":"2025-10-29T22:19:09","slug":"federal-reserve-cuts-key-rate-as-government-shutdown-clouds-economic-outlook","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/341705\/","title":{"rendered":"Federal Reserve cuts key rate as government shutdown clouds economic outlook"},"content":{"rendered":"

WASHINGTON (AP) \u2014 The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring<\/a>, even as inflation stays elevated. <\/p>\n

But Fed Chair Jerome Powell also cautioned that further rate cuts weren\u2019t guaranteed, citing the government shutdown\u2019s interruption of economic reports<\/a> and sharp divisions among 19 Fed officials who participate in the central bank\u2019s interest-rate deliberations. <\/p>\n

Speaking to reporters after the Fed announced its rate decision, Powell said there were \u201cstrongly differing views about how to proceed in December\u201d at its next meeting and a further reduction in the benchmark rate is not \u201ca foregone conclusion \u2014 far from it.\u201d <\/p>\n

The rate cut \u2014 a quarter of a point \u2014 brings the Fed\u2019s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades before implementing three cuts last year. Lower rates could, over time, reduce borrowing costs for mortgages, auto loans, and credit cards, as well as for business loans. <\/p>\n

The move comes amid a fraught time for the central bank, with hiring sluggish<\/a> and yet inflation stuck above the Fed\u2019s 2% target<\/a>. Compounding its challenges, the central bank is navigating without the economic signposts it typically relies on from the government, including monthly reports on jobs, inflation<\/a>, and consumer spending, which have been suspended because of the government shutdown. <\/p>\n

Financial markets largely expected another rate reduction in December, and stock prices dropped after Powell\u2019s comments, with the S&P 500 nearly unchanged and the Dow Jones Industrial Average closing slightly lower<\/a>.<\/p>\n

\u201cPowell poured cold water on the idea that the Fed was on autopilot for a December cut,\u201d said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. \u201cInstead, they\u2019ll have to wait for economic data to confirm that a rate cut is actually needed.\u201d<\/p>\n

Powell was asked about the impact of the government shutdown, which began on Oct. 1 and has interrupted the distribution of economic data. Powell said the Fed does have access to some data that give it \u201ca picture of what\u2019s going on.\u201d He added that, \u201cIf there were a significant or material change in the economy, one way or another, I think we\u2019d pick that up through this.\u201d<\/p>\n

But the Fed chair did acknowledge that the limited data could cause officials to proceed more cautiously heading into its next meeting in mid-December.<\/p>\n

\u201cThere\u2019s a possibility that it would make sense to be more cautious about moving (on rates). I\u2019m not committing to that, I\u2019m just saying it\u2019s certainly a possibility that you would say \u2018we really can\u2019t see, so let\u2019s slow down.\u2019\u201d<\/p>\n

The Fed typically raises its short term rate to combat inflation, while it cuts rates to encourage borrowing and spending and shore up hiring. Right now it sees risks of both slowing hiring and rising inflation, so it is reducing borrowing costs to support the job market, while still keeping rates high enough to avoid stimulating the economy so much that it worsens inflation.<\/p>\n

Yet Powell suggested the Fed increasingly sees inflation as less of a threat. He noted that excluding the impact of President Donald Trump\u2019s tariffs, inflation is \u201cnot so far from our 2% goal.\u201d Inflation has slowed in apartment rents and for many services, such as car insurance. A report released last week showed that inflation remains elevated<\/a> but isn\u2019t accelerating. <\/p>\n

The government recalled employees to produce the report, despite the shutdown, because it was used to calculate the cost of living adjustment for Social Security.<\/p>\n

At the same time, the economy could be rebounding from a sluggish first half, which could improve job growth in the coming months, Powell said. That would make rate cuts less necessary. <\/p>\n

\u201cFor some part of the committee, it\u2019s time to maybe take a step back and see if whether there really are downside risks to the labor market,\u201d Powell said. \u201cOr see whether in fact that the stronger growth that we\u2019re seeing is real.\u201d<\/p>\n

Two of the 12 officials who vote on the Fed\u2019s rate decisions dissented Wednesday, but in different directions. Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, voted against the move because he preferred no change to the Fed\u2019s rate. Schmid has previously expressed concern that inflation remains too high.<\/p>\n

Fed governor Stephen Miran dissented for the second straight meeting in favor of a half-point cut. Miran was appointed by President Donald Trump just before the central bank\u2019s last meeting in September.<\/p>\n

Trump has repeatedly attacked Powell for not reducing borrowing costs more quickly. In South Korea early Wednesday he repeated his criticisms of the Fed chair. <\/p>\n

\u201cHe\u2019s out of there in another couple of months,\u201d Trump said. Powell\u2019s term ends in May. On Monday, Treasury Secretary Scott Bessent confirmed<\/a> the administration is considering five people to replace Powell, and will decide by the end of this year. <\/p>\n

The Fed also said Wednesday that it would stop reducing the size of its massive securities holdings, which it accumulated during the pandemic and after the 2008-2009 Great Recession. The change, to take effect Dec. 1, could over time slightly reduce longer-term interest rates on things like mortgages but won\u2019t have much overall impact on consumer borrowing costs.<\/p>\n

Without government data, the economy is harder to track, Powell said. September\u2019s jobs report, scheduled to be released three weeks ago, is still postponed. This month\u2019s hiring figures, to be released Nov. 7, will likely be delayed and may be less comprehensive when finally released. And the White House said last week that October\u2019s inflation report<\/a> may never be issued at all. <\/p>\n

Before the government shutdown cut off the flow of data, monthly hiring gains had weakened to an average of just 29,000 a month<\/a> for the previous three months, according to the Labor Department\u2019s data. The unemployment rate ticked up to a still-low 4.3% in August from 4.2% in July. <\/p>\n

More recently, several large corporations have announced sweeping layoffs<\/a>, including UPS<\/a>, Amazon<\/a>, and Target, which threatens to boost the unemployment rate if it continues. Powell said the Fed is watching the layoff announcements \u201cvery carefully.\u201d<\/p>\n

___<\/p>\n

Associated Press Writer Alex Veiga in Los Angeles contributed to this report.<\/p>\n","protected":false},"excerpt":{"rendered":"WASHINGTON (AP) \u2014 The Federal Reserve cut its key interest rate Wednesday for a second time this year…\n","protected":false},"author":3,"featured_media":341706,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[6229,3881,64,69,12042,455,60,57,168292,59,266,94803,142,18818,606,18244,17600,61,67,132,68],"class_list":{"0":"post-341705","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-amazon-com","9":"tag-ap-top-news","10":"tag-business","11":"tag-donald-trump","12":"tag-economic-policy","13":"tag-federal-reserve-system","14":"tag-financial-services","15":"tag-general-news","16":"tag-gennadiy-goldberg","17":"tag-inc","18":"tag-inflation","19":"tag-jeffrey-schmid","20":"tag-jerome-powell","21":"tag-kansas-city","22":"tag-labor","23":"tag-scott-bessent","24":"tag-stephen-miran","25":"tag-u-s-news","26":"tag-united-states","27":"tag-unitedstates","28":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115459782392179316","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/341705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=341705"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/341705\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/341706"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=341705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=341705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=341705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}