Rate Cut! Fed Lowers Interest Rates by 25 Basis Points, Final Decision of the Year Pending

The policy statement said that available indicators suggest economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has risen slightly but remains low as of August; recent indicators are consistent with these developments. Inflation has increased since earlier this year and remains elevated.

At the outset of the press conference, Fed Chair Powell stated that data obtained before the government shutdown suggested the growth trajectory of economic activity might be slightly stronger than previously expected, primarily due to robust consumer spending.

Regarding the impact of the government shutdown, Powell believed its suppressive effect on economic activity would persist, but these effects should gradually dissipate after the shutdown ends. The Congressional Budget Office (CBO) predicted on Wednesday that the month-long government shutdown had reduced U.S. GDP by at least $7 billion by the end of this month. CBO Director Phillip Swagel said that if the shutdown continues, the scale of these economic losses would further increase.

Addressing the job market, Powell said all available information points to a labor market that is softening. "Although the official September employment data release has been delayed, available evidence suggests that layoffs and hiring activities remain at low levels. At the same time, in this less vibrant, overall somewhat softer labor market, households' perception of job opportunities and businesses' sense of hiring difficulty are both continuing to decline. In recent months, the downside risks facing the job market appear to have increased. The Fed is closely monitoring layoff announcements. Many companies are talking about economic divergence. Low-income consumers are struggling, and there is indeed some possibility regarding the economy exhibiting a K-shaped recovery."

Notably, earlier this week, Amazon announced it would lay off 14,000 employees company-wide; on Wednesday, media giant Paramount also said it would cut at least 1,000 jobs across several divisions, including CBS News. United Parcel Service (UPS) revealed it would reduce its workforce by 48,000 employees this year. Last week, Target announced it would eliminate 1,800 headquarters positions, marking the company's first large-scale layoff in a decade.