The Federal Reserve, goaded by the risk of rising unemployment, reduced interest rates on Wednesday for the first time since December and indicated more cuts would follow to halt any slide in a labor market already experiencing higher joblessness among Blacks, a declining workweek, and other signs of weakness.
The decision moves in a direction called for by President Donald Trump, but falls far short of the steep cuts in borrowing costs that he has demanded - and which were apparently penciled into projections submitted by new Fed Governor Stephen Miran, who cast the only dissenting vote.
Fed Chair Jerome Powell, speaking in a press conference after the U.S. central bank lowered its benchmark interest rate by a quarter of a percentage point to the 4.00%-4.25% range and indicated more cuts would follow at meetings in October and December, said the softening job market was now top of the mind for him and his fellow policymakers.
"There are no risk-free paths ... It's not incredibly obvious what to do," Powell told reporters at the end of a two-day policy meeting. "We have to keep our eye on inflation at the same time, we cannot ignore ... maximum employment."
Powell said he believes the recent pace of job creation is running below the break-even rate needed to hold the unemployment rate constant, and that with businesses doing very little hiring overall, any increase in layoffs could quickly feed into higher unemployment.
Source : Reuters