Federal Reserve cuts interest rates by 0.25 percentage points amid weaker labor market

The Federal Reserve on Wednesday cut its benchmark interest rate by 0.25 percentage points, but Chair Jerome Powell hinted that the central bank might pause before further lowering borrowing costs.

The Fed cut lowers the federal funds rate — what banks charge each other for short-term loans — to between 3.75% and 4%, down from its prior range of 4% to 4.25%. The Fed reduced rates by the same amount in September, its first cut since December of 2024.

In a Wednesday afternoon press conference to discuss the decision, Federal Reserve Chair Jerome Powell said another rate cut at its next meeting, set for Dec. 10, “isn’t a foregone conclusion.” That may disappoint some borrowers and investors, given that the Fed last month had penciled in an additional rate cut for its final meeting of the year.

There were strongly differing views on how to proceed in December” during the central bank’s meeting today, Powell said. Those conflicting views mean “we haven’t made a decision about December. I’m saying something in addition here — that it’s not to be seen as a foregone conclusion. In fact, far from it.”

He added, “We’ve cut 50 more basis points in the last two meetings, and there’s a sense from some, ‘Let’s pause here,’ and a sense from others, ‘Let’s go ahead.

Stocks erased modest gains after Powell’s comments, with the S&P 500 slipping 0.2% in afternoon trading and the Dow Jones Industrial Average dipping 0.4%.

The central bank’s move to ease monetary policy is aimed at shoring up economic growth by lowering borrowing costs, spurring consumer spending and investment by businesses. Although the ongoing U.S. government shutdown has delayed release of the Labor Department’s September jobs report, other indicators point to a continued slowdown in hiring. The ADP National Employment Report, for instance, showed private-sector payrolls shrinking by 32,000 last month.

In its policy statement on Wednesday, the Fed said “downside risks to employment rose in recent months.”

While Powell said the Fed is watching layoff announcements from large businesses such as Amazon, he added that the weakness in the job market does not appear to be accelerating. His comments indicate that another back-to-back rate cut this year isn’t a certainty, financial experts said.

“The knee-jerk reaction of the markets to the Fed meeting (and press conference) was to sell stocks and bonds, because Chairman Powell said that an additional rate cut in December wasn’t a sure thing,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in an email. Investors “were negatively surprised that future cuts might be taken off the table.”

The Federal Open Market Committee, or FOMC, the panel that sets the Fed’s monetary policy, isn’t scheduled to meet on interest rates in November.  CBS IN DETAILS