Jerome Powell warns of employment risks as Fed cuts rates again
The Federal Reserve is continuing with rate cuts, with another 25bps reduction and an end to quantitative easing.
- The Federal Reserve cut the federal funds target by 25bps, bringing it between 3.75% and 4.00%,
- Fed is ending quantitative tightening, halting its balance sheet runoff by December
- The agency is operating in a data vacuum due to the U.S. government shutdown
Slow job growth is an increasing concern for the Federal Reserve. On Wednesday, October 29, the U.S. Federal Reserve delivered a widely anticipated 25-basis-point rate cut, bringing the federal funds target range to 3.75%–4.00%.
“In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen in recent months,” said Federal Reserve Chair Jerome Powell. “Inflation has eased significantly… but remains somewhat elevated.”
According to reports, the vote was 10-2. Trump appointee Stephen I. Miran, who joined the board of governors last month, voted for a larger reduction. At the same time, Jeffrey R. Schmid, president of the Federal Reserve Bank of Kansas City, wanted ot keep interest rates steady.
At the same time, the Fed announced an end to its balance sheet reduction, or quantitative tightening, which will wind down by December 1. The decision marks a significant policy pivot, as the Fed tackles the slowing labor market.
In the FOMC statement, the board acknowledged that job growth has slowed, and risks to employment remain elevated. While inflation remains “somewhat elevated,” the Fed is more concerned with deteriorating employment conditions.
Crypto markets down despite Fed rate cut
This is the second Fed rate cut this year, the last being in September. Earlier in the year, the Fed was much more concerned with inflation, especially because of disruptions in the supply chain due to Donald Trump’s trade policy.
Still, the latest rate cut shows a more dovish tone, especially as the Fed lacks key economic data due to the ongoing government shutdown.
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