The Federal Reserve lowered its benchmark interest rate Wednesday for the second time this year, aiming to support economic growth and hiring even as inflation remains elevated. But Fed Chairman Jerome Powell cautioned that another cut at the central bank meeting in December is far from certain.
Fed monetary policy adjustments usually influence actions of central banks around the world.
The quarter-point reduction brings the federal funds rate to a range of 3.75 percent to 4 percent, down from about 4.1 percent. The Fed had raised rates to roughly 5.3 percent in 2023 and 2024 to fight the sharpest inflation spike in decades before beginning to ease policy last year. Lower rates could gradually reduce borrowing costs for mortgages, auto loans, and business credit.
Powell said policymakers were split on the path ahead. “A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it,” he said, citing “strongly differing views” among the 19 officials involved in Wednesday’s decision.
The Fed’s statement said economic activity continues to expand at a “moderate pace,” though job gains have slowed and unemployment has inched higher. Inflation remains above the 2 percent target, while the ongoing government shutdown has delayed key economic data.
Powell said that future adjustments will depend on incoming information and the balance of risks to growth and inflation. “We will carefully assess the outlook before taking further action,” he said.
Financial markets, which had expected a third straight cut in December, adjusted their bets after Powell’s remarks, reflecting uncertainty over whether the Fed’s easing campaign will continue.
