The Federal Reserve on Oct. 29 lowered interest rates for the second time in six weeks, shifting its focus to preventing a surge in unemployment from fighting inflation.
Fed officials lowered their benchmark lending rate to a range between 3.75% and 4%, the lowest in three years.
The central bank’s rate-setting committee made its decision despite lacking the most current full month of government employment data because of a government shutdown.
Language in the latest Fed statement indicates the central bank is more concerned about the employment outlook rather than inflation.
“Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments,” the statement said.
All but two members of the Fed committee voted for lowering the rate. Voting against this action were Stephen I. Miran, who for the second straight meeting preferred to lower the target range for the federal funds rate by 1/2 percentage point, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate.
The Dow Jones Industrial Average and the Standard & Poor’s 500 turned lower after Fed Chair Jerome Powell said there was debate about following up the latest rate cut with another one later this year.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it,” he said. “Policy is not on a pre-set course.”
The Fed also decided to halt efforts to reduce its balance sheet, beginning in December, over concerns about weak job growth along with indications of funding tightness in money markets.
The U.S. job market has become tighter in recent months with major companies such as Amazon recently announcing job cuts. More than 100,000 federal employees have lost their jobs as the Trump administration has tried to reduce the size of the federal government and cut wasteful spending.
Total nonfarm payroll employment in August rose just 22,000 and the unemployment rate was little changed at 4.3%. New Jersey’s jobless rate has risen as high as 5% and has been consistently about a half a percentage point higher than the national average.
The Consumer Price Index climbed at an annual rate of 3% in September, coming in below economists’ forecasts as the impact of President Trump’s tariffs remain subdued.
Prospective homeowners are feeling more sanguine about interest rates. On Oct. 29, the current average 30-year fixed mortgage interest rate is 6.18%, according to Bankrate. Rates are lower than they were in early 2025, when the average 30-year fixed-rate mortgage climbed above 7%.
Credit card interest rates are variable and directly tied to the Fed’s benchmark. That means borrowers carrying a balance will see changes within a few billing cycles.
The Fed has kept borrowing costs elevated for more than two years to help slow inflation, which climbed to a more-than-40-year high of 9.1% in June 2022.
