US Federal Reserve cuts interest rates for the second time this year to boost growth, hiring

The US Federal Reserve on Wednesday cut its key interest rate for the second time this year as it looks to boost economic growth and hiring even as inflation remains high.

“The pace of jobs growth has slowed this year and the unemployment rate rose but remained low during August,” the Fed said in a statement Wednesday. “Recent indicators are consistent with these developments.”

The government has not released unemployment data since August due to the federal shutdown that began Oct. 1. The Fed is instead looking at private sector data.

Wednesday’s decision dropped the Fed’s key rate from about 4.1 percent to about 3.9 percent. The central bank had raised its rates to about 5.3 percent in 2023 and 2024 to counter the biggest inflation surge in four decades.

Low rates can, over time, reduce the cost of borrowing for mortgages, auto loans and credit cards, as well as business loans.

The move comes amid difficult times for the central bank, with hiring slowing and inflation still remaining above the Fed’s two percent target.

Adding to its challenges, the central bank is operating without the economic signals it normally relies on from the government, including monthly reports on jobs, inflation and consumer spending, which have been suspended due to the government shutdown.

The Fed has signaled it may cut its key rate again in December, but a lack of data has increased uncertainty about its next steps.

The Fed typically raises its short-term rates to combat inflation, while cutting rates to encourage borrowing and spending and boost hiring.

Right now its two goals are in conflict, so it is reducing the cost of borrowing to support the job market, while still keeping rates high enough to avoid stimulating the economy so much that it worsens inflation.