The Federal Reserve cut interest rates on Wednesday for the third meeting in a row, moving to protect the labor market as signs of economic softening continue to accumulate. Policymakers voted to reduce the benchmark federal funds rate by another quarter percentage point, setting it between 3.5 percent and 3.75 percent, the lowest level in more than three years.
Chair Jerome Powell said the decision reflects growing evidence that hiring is slowing and that unemployment is rising among younger workers and minority groups. According to CNN and Reuters reporting, several senior Fed officials opposed the move, arguing that the central bank should focus more heavily on addressing persistent living costs.
The rate cuts follow months of sluggish job creation that have challenged earlier expectations of a resilient labor market. Economists say the central bank is attempting to prevent a sharper downturn while balancing the risk that easier financial conditions could complicate efforts to bring inflation closer to target.
A Divided Federal Reserve
The dissent inside the Federal Open Market Committee highlights an emerging policy divide. Hawks warned that reducing rates too aggressively could reignite price pressures, while dovish members said the priority must be avoiding unnecessary labor market damage. Powell acknowledged these concerns but said the overall data points toward “a labor market losing momentum.”
The Fed’s latest move continues a policy shift that began earlier in the year, when indicators of employment weakness became more pronounced. Rising unemployment among young adults and minority groups, combined with slower wage growth, reinforced the case for easing.
Economists note that the committee may slow or pause further cuts if inflation shows renewed strength or if labor-market conditions stabilize. Markets are watching upcoming employment and inflation releases closely to gauge whether the Fed will pursue additional easing this winter.
Implications for Global Policy
The Fed’s stance could influence central banks worldwide, including those in Europe that are navigating their own mix of inflation pressures and slowing growth. The European Central Bank and Bank of England are expected to assess whether U.S. easing affects their inflation paths, especially as global financial conditions adjust.
Analysts say the shift underscores how sensitive the U.S. economy has become to labor-market fluctuations after years of elevated prices. For households and businesses, the latest cut is expected to ease borrowing conditions and support spending, though its full impact may take months to materialize.