WASHINGTON — The Federal Reserve cut its benchmark interest rate by a quarter point Wednesday, its third consecutive reduction, while also expressing concern about the state of the economy.
“Available indicators suggest that economic activity has been expanding at a moderate pace,” the Fed said in a statement. “Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.”
The Fed’s rate-setting committee added that “Uncertainty about the economic outlook remains elevated” and “downside risks to employment rose in recent months,” indications that the panel may need to see improvements if it is going to cut the rate again when it meets in late January.
Wednesday’s decision brings the Fed’s key rate down to range of 3.5%-3.75%, the lowest it has been in about three years.
There were several factors at play in the Fed’s decision as well as differing opinions among members of the Federal Open Market Committee.
Lawrence White, an economics professor at New York University’s Stern School of Business, told Spectrum News ahead of the vote that “there is a lot of uncertainty — first about what the state of the economy is, where inflation is going, where the economy, employment and unemployment is going.”
He added that some of the data the committee relies on has not returned to its regular schedule following this fall’s government shutdown.
During the 43-day shutdown — the longest in U.S. history — the Bureau of Labor Statistics delayed the release of several reports and later published a revised schedule once the funding lapse was resolved.
As part of the changes, the jobs report for October was canceled and the one for November was moved to Dec. 16, meaning these unemployment numbers were not available ahead of Wednesday’s decision.
“The Federal Reserve … in taking its vote (Wednesday) will have even less information than usual,” White said.
The September report, which was released Nov. 20, showed that U.S. employers had added 119,000 jobs but also included revisions to earlier figures, indicating that the economy lost 4,000 positions in August.
Meanwhile, the Commerce Department said Friday that the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, showed a rise of 2.8% year-over-year in September — lower than forecast but still elevated above the central bank’s 2% target. This report also came out five weeks later than it was originally scheduled to, due to the shutdown.
The latest rate vote came as President Donald Trump — who has long railed against Powell in frustration over his interest rate policies — is beginning final interviews for Powell’s successor. Powell’s term ends in May.
On Air Force One on Tuesday night, Trump told reporters, “We’re going to be looking at a couple different people, but I have a pretty good idea of who I want.”
Among the names Trump has floated for the role are Kevin Hassett, the director of the White House National Economic Council.
CNBC reported Thursday that Trump, along with Treasury Secretary Scott Bessent, will interview Hassett and Fed Governor Kevin Warsh for the job.
When asked during an interview Monday with Politico if immediately lowering interest rates was a “litmus test” in his decision for the next chair, the president said yes and indicated that he thought Powell should support a reduction as well.
Hassett offered his opinion on future monetary policy in an interview with CNBC on Monday, saying that he thought the Fed “should probably continue to get the rate down some” but should “do so prudently with an eye on the data.”
This is a breaking news story. Please check back for updates.