Policy Eased

Growth Steady but Clouds are Forming

The Federal Reserve said the US economy continues to expand at a moderate pace, though job gains have slowed and the unemployment rate has inched higher. 

Inflation has crept up since earlier in the year, remaining above the 2% goal and keeping pressure on prices.

Still, the overall data picture is incomplete. The ongoing federal government shutdown has disrupted some reporting, leaving the Fed with less visibility into current economic conditions. 

Consumer activity remains resilient, but softer business investment and uncertainty around fiscal operations have added new headwinds.

Fed Eases Policy, Citing Job Market Strain and Uncertainty

In response to shifting risks, the Fed lowered the federal funds rate by 25 basis points to 3.75%–4.00% and announced plans to end balance-sheet reductions on December 1. 

Policymakers noted that while inflation is still elevated, downside risks to employment have increased in recent months.

Officials described the move as a precautionary step, aimed at supporting labor conditions amid softer hiring and elevated uncertainty. 

The shutdown added to that caution, temporarily reducing spending and delaying key government data that normally guide monetary decisions.

Data, Not Dates, Will Guide the Next Step

The Committee emphasized that future rate decisions will depend on incoming information, the evolving outlook, and the balance of risks. 

With limited fresh data during the shutdown, officials are adopting a patient stance, ready to adjust policy if new risks to inflation or employment emerge.

This approach points to the Fed’s desire to maintain flexibility — easing slightly now to cushion against potential weakness while keeping the option open for further action once the full economic picture becomes clearer.

Investors Read Move as “Safety Cut”

Treasury yields ticked up modestly and equities fell from intraday highs, as the Fed will stay cautious about a December rate cut.

The shutdown has added another layer of unpredictability, heightening short-term volatility and reinforcing the Fed’s message of patience. 

For now, the quarter-point cut offers insurance against slowing growth without signaling a further policy shifts.