The Federal Reserve cut interest rates by a quarter percentage point on Wednesday after noting cooler labor-market momentum and persistent uncertainty surrounding the economic outlook.
The Federal Open Market Committee lowered the target range for the federal funds rate to 3.5 to 3.75 percent, a move Chair Jerome Powell said reflects a shift in the balance of risks facing the U.S. economy.
Powell said economic activity is still expanding at a moderate pace, though job growth has slowed steadily this year. The unemployment rate has edged higher through September, and recent data confirms this softening.
Inflation, after easing earlier in the year, has moved higher again and remains elevated, complicating the push toward the Fed’s 2 percent objective.
Policymakers reiterated their commitment to achieving maximum employment and stable prices. They warned that downside risks to the labor market have increased in recent months even as inflation pressures continue to linger.
“There is no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Powell said. “Our obligation is to make sure that a one-time increase in the price level does not become an ongoing inflation problem.”
The Fed highlighted a firm return to a data-driven approach in coming months. Officials said they will evaluate each new set of indicators, broader economic trends, and the evolving balance of risks before considering any further adjustments.
Powell emphasized that the central bank stands ready to act if new threats emerge that could hinder progress on inflation or jobs.
The Fed also announced an operational shift, noting that reserve balances have declined to what it considers ample levels. To maintain sufficient reserves across the financial system, the central bank will begin purchasing shorter-term Treasury securities.
The rate cut reflects the Fed’s effort to navigate slowing job gains, stubborn inflation, and heightened uncertainty while keeping policy flexible as the economy continues to adjust.
