Fed cuts US interest rates again despite ‘flying blind’

US Federal Reserve Cuts Interest Rates Again Amid Labour Market Concerns and Ongoing Government Shutdown

The US Federal Reserve has announced another interest rate cut, lowering its key lending rate by 0.25 percentage points to a range of 3.75% to 4%. The decision comes as inflation fears ease and concerns about a slowing labour market take center stage.

The move, made despite the ongoing US government shutdown, which has now stretched close to a month, reflects the Fed’s growing unease over sluggish job growth and a potential economic slowdown. The lack of official labour data has left policymakers “flying blind,” according to economists.

Two members of the Fed’s policy committee opposed the decision. Stephen Miran, a member on leave from President Donald Trump’s Council of Economic Advisers, pushed for a 0.5 percentage point cut, while Jeffrey Schmid of the Federal Reserve Bank of Kansas City wanted to hold rates steady.

The Fed’s latest rate cut brings borrowing costs to their lowest in three years, aimed at stimulating hiring and growth. Chair Jerome Powell acknowledged that the US job market has turned “less dynamic and somewhat softer,” though he cautioned that the weakness isn’t yet accelerating.

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However, the government shutdown has delayed the release of critical employment data, including the September jobs report, forcing the Fed to rely on private sector figures. Data from ADP payrolls indicated a loss of 32,000 jobs in September, signaling a persistent hiring slowdown.

Inflation data released earlier showed prices rising 3% year-over-year, slightly below forecasts. This mild reading allowed the Federal Reserve to focus more on supporting the labour market rather than combating inflation. Powell noted that inflation “away from tariffs is not far from our 2% goal,” referencing Trump’s tariffs that earlier spurred price increases.

The Fed also confirmed it will end its balance sheet reduction program on December 1, halting the unwinding of trillions of dollars in government debt and mortgage-backed securities accumulated during the pandemic and earlier financial crises.

Powell emphasized that another rate cut in December is “far from a foregone conclusion,” adding that there are “strongly differing views” among policymakers. He likened the situation to “driving in fog — you slow down,” signaling caution until clearer economic data emerges.

Wall Street initially expected further rate cuts in 2025, but Powell’s remarks cooled those expectations. Analysts from Oxford Economics and JP Morgan noted that future moves will depend heavily on incoming job and inflation figures — or the continuation of the government shutdown.

The Federal Reserve’s rate cut marks its latest effort to navigate a delicate economic moment — balancing low inflation, rising unemployment, and political pressure from Donald Trump, who continues to urge Powell to slash rates further.