Copyright bizwatchnigeria
The United States Federal Reserve on Wednesday announced a 25-basis-point interest rate cut — the second in 2025 — as the country faces its longest federal government shutdown on record. With this latest reduction, the benchmark federal funds rate now stands between 3.75% and 4.00%, marking another key step in the Fed’s efforts to stabilize the economy amid rising uncertainty and mounting political pressure. Despite persistent inflationary pressures, the central bank has faced growing calls from former President Donald Trump and other critics to lower borrowing costs to support growth. In a policy statement following the decision, the Fed acknowledged that while the unemployment rate has inched up, it remains historically low. “Job gains have slowed,” the statement noted, adding that “inflation has moved up and remains somewhat elevated.” The central bank also pointed out that the ongoing government shutdown — now the longest in U.S. history — has disrupted critical economic data collection, complicating its ability to assess the economy’s health. According to available indicators, economic activity continues to expand moderately, with recent data showing slower job creation and a modest uptick in unemployment through August. Inflation, meanwhile, remains above the Fed’s long-term target of 2%. The Federal Open Market Committee (FOMC) reiterated its dual mandate to pursue maximum employment and price stability, emphasizing that uncertainty surrounding the economic outlook remains “elevated.” The committee said it remains “attentive to risks on both sides of its mandate.” Citing a shifting balance of risks, the Fed said it decided to lower the target range for the federal funds rate by one-quarter percentage point, to a new range of 3.75%–4.00%. The FOMC also announced plans to end the reduction of its securities holdings by December 1, signaling a pause in its quantitative tightening efforts. The committee reaffirmed its commitment to supporting maximum employment and guiding inflation back to its 2% objective. Moving forward, policymakers will closely monitor economic data, financial conditions, and global developments to determine whether further adjustments are necessary. The Fed said it remains prepared to alter its policy stance if risks arise that could hinder its objectives. The decision saw some internal disagreement. Stephen I. Miran voted for a deeper 50-basis-point cut, while Jeffrey R. Schmid preferred to maintain the current rate range. Those voting in favor included Chair Jerome Powell, Vice Chair John C. Williams, and other members of the board.
