ALBAWABA- The U.S. Federal Reserve on Wednesday cut its key interest rate for the second time this year, lowering the benchmark federal funds rate by a quarter percentage point to a range of 3.75% to 4%, the lowest level since late 2022, in an effort to support a weakening labor market.
The 10-2 vote by the Federal Open Market Committee (FOMC) marks a clear shift from the aggressive monetary tightening of the post-pandemic years, as inflation continues to ease toward the Fed’s 2% target.
Fed Chair Jerome Powell said the move was intended as “insurance against further labor market deterioration,” citing rising unemployment, now at 4.3%, and slower job creation, with only 114,000 positions added in September. “We’re not seeing a recession yet, but risks are rising,” Powell told reporters, stressing the central bank’s dual mandate of price stability and maximum employment.
The latest cut follows a surprise half-point reduction in September that lowered borrowing costs across mortgages, business loans, and credit markets.
This smaller 25-basis-point adjustment suggests confidence that disinflation is holding, with core personal consumption expenditures (PCE) prices up just 2.7% year-on-year in August.
Mortgage rates have already slipped below 6%, sparking a modest housing rebound, though consumers continue to face tight credit in other sectors. Economists say the easing is a calculated effort to stabilize growth without reign
