The Federal Reserve Bank cut its key interest rate by a quarter-point and projected it would do so twice more this year as concern grows at the central bank about the health of the nation’s labour market.
The move is the bank’s first cut since December and lowered its short-term rate to about 4.1 per cent, down from 4.3 per cent.
Federal Reserve officials, led by Chair Jerome Powell, had kept their rate unchanged this year as they evaluated the impact of tariffs, tighter immigration enforcement, and other Trump administration policies on inflation and the economy. Trump had been badgering Powell to cut rates for months.
The Fed is facing both a challenging economic environment and threats to its traditional independence from day-to-day politics.
Hiring has weakened while inflation remains stubbornly elevated. It rose 2.9 per cent in August from a year ago, according to the consumer price index, up from 2.7 per cent in July and noticeably above the Fed’s 2 per cent target.
“In this less dynamic and somewhat softer labour market, the downside risks to employment appear to have risen,” Powell said at a press conference following a two-day meeting.
AP
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