The US Federal Reserve cut its key interest rate on Wednesday for the second time this year, seeking to support economic growth and jobs even as inflation remains high.
“Job growth has slowed this year and the unemployment rate has increased but remained low through August,” the Fed said in a statement Wednesday. “More recent indicators are consistent with these developments.”
The government has not released unemployment data after August due to the federal government shutdown that began Oct. 1. Instead, the Fed monitors private sector performance.
Wednesday's decision cuts the Fed's key rate to about 3.9 percent from about 4.1 percent. The central bank raised the rate to about 5.3% in 2023 and 2024 to combat the biggest surge in inflation in four decades.
Lower rates can lower borrowing costs over time for mortgages, auto loans and credit cards, as well as business loans.
The move comes amid a difficult time for the central bank, with hiring sluggish and inflation still above the Fed's two percent target.
Compounding the problems, the central bank is moving without the economic indicators it usually relies on from the government, including monthly reports on jobs, inflation and consumer spending that have been suspended due to the government shutdown.
The Fed has signaled it could cut its key rate again in December, but a data drought is raising uncertainty about its next steps.
The Fed typically raises short-term rates to combat inflation, while it cuts rates to stimulate borrowing and spending and support hiring.
Now its two goals are in conflict: It lowers borrowing costs to support the labor market while keeping rates high enough to avoid stimulating the economy so much that it causes inflation to worsen.
