Federal Reserve announces new interest rates: this is how they’ve changed
After a two-day meeting of the Federal Open Market Committee, the U.S.’s central bank has announced a new federal funds rate.
The U.S.’s Federal Reserve has implemented its second consecutive interest-rates cut, announcing a 0.25% reduction.
After a two-day meeting, the Federal Open Market Committee (FOMC) said on Wednesday that it is dropping its federal funds rate to 3.75%-4.00%.
The move, which was widely expected, comes amid concerns over stalling growth in the U.S. jobs market.
In a statement announcing Wednesday’s new rate cut, the Federal Reserve noted: “Job gains have slowed this year.”
How has job growth slowed in the U.S.?
The most recent report by the U.S.’s Bureau of Labor Statistics (BLS), released in September, showed only 22,000 jobs were added to the country’s economy in August.
While the ongoing federal government shutdown has prevented the BLS from issuing its October report, estimates elsewhere put American employment growth in September at around 60,000 jobs.
By comparison, the U.S. averaged a gain of 186,000 jobs per month in 2024, per BLS statistics.
Second straight quarter-point cut
At its meeting in September, the FMOC also agreed a 0.25% cut to its federal funds rate, ending a nine-month run in which the body had left rates unchanged.
In a press conference on Wednesday, Federal Reserve Chairman Jerome Powell said: “Although some important federal government data have been delayed due to the shutdown, the public and private sector data that have remained available suggest that the outlook for employment and inflation has not changed much since our meeting in September."
What is the inflation rate in the U.S.?
While inflation in the U.S. remains above the Fed’s stated target of 2%, BLS statistics for September prices showed only a marginal rise on its figures for August, from 2.9% to 3.0% - an uptick below economists’ forecasts.
How can an interest-rates cut help jobs growth?
By reducing interest rates, the Fed makes it cheaper for businesses and consumers to borrow money. This, in turn, can encourage economic activity and create an environment in which companies are likelier to be hiring.
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