Fed's Powell Cites Weakening Job Market For Interest Rate Cut

Core Viewpoint - The Federal Reserve has lowered interest rates for the first time in months due to a weakening labor market, despite ongoing inflation concerns [1][2]. Group 1: Interest Rate Changes - The Federal Reserve's policymaking panel voted 11-1 to lower interest rates by a quarter-point, changing the range from 4.25%-4.5% to 4%-4.25% [2][3]. - Investors are anticipating a 91.9% probability that the Fed will further reduce rates by at least a quarter-point to between 3.75% and 4% on October 29 [5]. Group 2: Labor Market Insights - The U.S. labor market is experiencing a "marked slowdown" in both supply and demand, with unemployment rising to 4.3% in August, which was higher than expected [3][6]. - Fed Governor Michelle Bowman expressed concerns that the labor market could enter a "precarious phase," indicating potential for sudden deterioration [3]. Group 3: Inflation Outlook - Powell noted that "near-term risks" to inflation are "tilted to the upside," while uncertainty around inflation remains high [2][3]. - Wall Street anticipates annual inflation to reach 3% in August, a slight increase from July, with headline PCE inflation expected to rise to 2.8% from 2.6% [4]. Group 4: Political Context - The Federal Reserve has faced criticism from President Trump, who has urged for more aggressive rate cuts [6]. - The Fed has planned for up to two additional 25-basis-point reductions by the end of the year, aiming to stabilize inflation around 2% while maintaining full employment [6].