Fed responds to weaker labor market with interest rate cut

On Wednesday, the US Federal Reserve (Fed) lowered its key interest rate by a quarter of a percentage point, bringing it to a range of 4 to 4.25 percent. This is the first move since December and also signals that two further similar cuts could follow by the end of the year.

With this move, the Fed is responding to concerns about a weakening labor market and rising unemployment, while the risk of persistent inflation is receding into the background, according to its representatives.

The majority of members, including those appointed by Donald Trump, supported the decision. One exception was the new governor, Stephen Miran, who advocated a more significant cut.
The Fed's projections remain unchanged: inflation is expected to end this year at 3 percent, unemployment at 4.5 percent, and economic growth is estimated at 1.6 percent.

The financial markets reacted with cautious optimism: stocks rose while the dollar fell.
Fed Chairman Jerome Powell also confirmed that the central bank is currently cutting ten percent of its workforce and that “at the end of this period” the number of employees will be back to where it was ten years ago.

(reuters, max)