The Federal Reserve announced that it slashed interest rates for the second time this year amid rising unemployment and increasing inflation. <\/p>\n
The Federal Open Market Committee released its statement on Wednesday saying that it would slash interest rates by a quarter of a percentage point. <\/p>\n
Conditions in the labor market appea to be gradually cooling and inflation remains somewhat elevated,\u201d a Chairman Jerome Powell said.<\/p>\n
The announcement comes amid a time of uncertainty for the central bank. Due to the government shutdown, the Bureau of Labor Statistics did not release its monthly jobs report. It likely will miss an additional jobs report in November should the government remain closed. <\/p>\n
\u201cThe shutdown of the federal government will weigh on economic activity while it persists, but these effects should reverse once the shutdown ends,\u201d Powell said. <\/p>\n
Powell also discussed the effects of President Donald Trump\u2019s across-the-board reciprocal tariffs have also caused prices for goods to increase.<\/p>\n
\u201cHigher tariffs are pushing up prices in some categories of goods, resulting in higher overall inflation,\u201d he said. Powell said it might be reasonable to say that price increases will be relatively short-lived. <\/p>\n
\u201cBut it is also possible that the inflationary effects could instead be more persistent and that is a risk to be assessed and managed,\u201d he said. <\/p>\n
That complicates the Federal Reserve\u2019s ability to determine whether to raise interest rates, lower them or keep them the same. The Federal Reserve\u2019s Board of Governors has to balance its dual mandate to keep inflation low while not causing high unemployment.<\/p>\n
Powell outlined the challenge given job growth has slowed down significantly in recent months while prices continue to rise. <\/p>\n
\u201cIn the near term, risks to inflation are tilted to the upside, and risks to employment to the downside\u2013a challenging situation,\u201d he said. \u201cThere is no risk-free path for policy as we navigate this tension between our employment and inflation goals.\u201d<\/p>\n
In addition, the Trump administration has repeatedly targeted Federal Reserve Chairman Jerome Powell, whom President Donald Trump has labeled a \u201cstupid person\u201d for not slashing interest rates. <\/p>\n
In addition, Trump has sought to remove Lisa Cook from the Federal Reserve Board of Governors. Bill Pulte, the director of the Federal Housing Finance Agency, has accused Cook of committing mortgage fraud by declaring two properties as her primary residence. <\/p>\n
In addition, Powell\u2019s term is set to expire in May and Trump has tasked Treasury Secretary Scott Bessent with finding a suitable replacement for Powell, whom the president nominated to lead the bank during his first tenure as president.<\/p>\n
Powell also deflated the stock market when he said that it was not guaranteed that the Federal Reserve would lower rates in December. <\/p>\n
\u201cWe continue to face two-sided risks,\u201d he said. \u201cA further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.\u201d<\/p>\n
That forced the Dow Jones Industrial Average to drop by almost 200 points. <\/p>\n
The risk from tariffs and increasing inflation comes as many on Wall Street fear a growing AI bubble and numerous companies ranging from Amazon to Target to Meta have announced they will slash jobs.<\/p>\n
Powel spoke about how economic prosperity remains uneven and how richer people are consuming more while poorer people are spending less. <\/p>\n
\u201cIf you listen to the earnings calls or the reports of big public consumer-facing companies, many of them are saying there’s a bifurcated economy there and that consumers on the lower end are struggling and buying less and shifting to lower cost products, but that at the top people are spending,\u201d he said. <\/p>\n
Powell also appeared to offer some warning signs about the labor market in coming months. <\/p>\n
\u201c A good part of the slowing likely reflects a decline in the growth of the labor force due to lower immigration and labor force participation, though labor demand has clearly softened as well,\u201d he said. Powell said that available evidence shows that layoffs of hiring remained low. <\/p>\n
\u201cIn this less dynamic and somewhat softer labor market the downside risks to employment appear to have risen in recent months,\u201d he said. <\/p>\n
Powell attributed the weakening of the job market. <\/p>\n
\u201cIt’s mostly a function of the change in supply,\u201d he said. Powell said.<\/p>\n
The Federal Reserve will have its final meeting of the year in December. <\/p>\n","protected":false},"excerpt":{"rendered":"
The Federal Reserve announced that it slashed interest rates for the second time this year amid rising unemployment and increasing inflation. The Federal Open Market Committee released its statement on Wednesday saying that it would slash interest rates by a quarter of a percentage point. Conditions in the labor market appea to be gradually cooling […]<\/p>\n","protected":false},"author":2,"featured_media":5023,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[173],"tags":[],"class_list":["post-5022","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n