Federal Reserve cuts interest rates a quarter point as US job market wobbles
The Federal Reserve cut interest rates by a quarter point as central bankers said worries about a wobbly US job market have begun to outweigh anxieties over inflation.Eleven of the Fed’s 12 central bankers voted for the regular-size cut including Fed Chairman Jerome Powell, who has spent most of the year deflecting attacks from President Trump over his refusal to lower rates.The exception was Stephen Miran, who instead voted for a jumbo-size, half-point cut — one day after he left his position as Trump’s economic adviser to become a Fed governor.Central bankers have been delaying rate cuts over fears that tariffs could reheat inflation, which has shown signs of picking up over the summer.Consumer spending has likewise been resilient despite Trump’s tariffs.Fed Chairman Jerome Powell called Wednesday’s decision a “risk-management cut” as policymakers confront a “very different picture of the risks to the labor market” following major downward revisions to job growth earlier this month.A narrow majority of central bankers pencilled in two more rate cuts before year’s end.
During his Jackson Hole speech last month, Powell signaled that the weakening labor market is now a greater concern than inflation – especially since tariffs might only introduce a one-time price impact.“The most encouraging part of this statement is the 11-1 decision, giving a sense of greater unanimity than what we were expecting,” Jeffrey Roach, chief economist for LPL Financial, said in a note Wednesday.“As the risks to labor markets rise, we should expect further cuts in October and December.”The Dow Jones Industrial Average soared about 450 points immediately after the policy note’s release, but the rally was cut to just 260 points, or 0.6%.Investors had largely been expecting a quarter-point cut on Wednesday.President Trump has ramped up his pressure campaign on the Fed to cut rates for months.
The attacks have turned personal, most recently slamming Powell as...