WASHINGTON – The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring, even as inflation stays elevated.
Fed Chair Jerome Powell also cautioned that further rate cuts weren’t guaranteed, citing the government shutdown’s interruption of economic reports and sharp divisions among 19 Fed officials who participate in the central bank’s interest-rate deliberations.
The rate cut — a quarter of a point — brings the Fed’s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades before implementing three cuts last year. Lower rates could, over time, reduce borrowing costs for mortgages, auto loans, and credit cards, as well as for business loans.
The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Fed’s 2% target. Compounding its challenges, the central bank is navigating without the economic signposts it typically relies on from the government, including monthly reports on jobs, inflation and consumer spending, which have been suspended because of the government shutdown.
Financial markets largely expected another rate reduction in December, and stock prices dropped after Powell’s comments, with the S&P 500 and Dow Jones Industrial Average closing slightly lower.
