NEW YORK– The Federal Reserve lowered its benchmark interest rate by a quarter percentage point on Wednesday, bringing it to a range of 4 to 4.25 percent, as policymakers sought to navigate slowing job growth while keeping inflation in check.
The move followed weeks of public clashes with President Donald Trump, who had pressed the Fed to cut rates more aggressively. Chairman Jerome Powell, speaking at a news conference, acknowledged the difficult balance the central bank faces.
“Ordinarily, when the labor market is weak, inflation is low. But right now, we face two-sided risks of weaker growth and higher inflation. There is no risk-free path,” Powell said. “This is a challenging situation.”
The Fed signaled that two additional rate cuts are possible this year. Until now, Powell had resisted trimming rates, citing concerns about inflation’s persistence. But slowing employment data proved decisive: job growth dropped from 139,000 in May to just 22,000 last month, even as the unemployment rate held steady at 4.3 percent. Inflation ticked up to 2.9 percent in August, up 0.2 points from July.
Powell suggested that restrictive immigration policies may be constraining labor supply. “There’s very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply,” he noted.
He added that tariffs’ impact on inflation appears more limited and temporary than previously feared.
Trump, who was in Britain when the cut was announced, has repeatedly criticized Powell, whom he appointed as Fed chair in his first term. The president accused Powell of withholding rate cuts during his administration while accommodating former President Joe Biden. Trump even threatened to dismiss Powell and sought to remove Fed Governor Lisa Cook, a Biden appointee, though a federal court blocked the move.
The president recently placed Stephen Miran, his former economic adviser, on the Fed board. Miran cast the lone dissenting vote in Wednesday’s decision, arguing for a larger half-point cut.
Powell pushed back against suggestions that politics influenced the decision. “We don’t frame these questions at all or see them in terms of political outcomes,” he said. “We’re taking a longer perspective. We’re trying to serve the American people as best we can.” (Source: IANS)
