Federal Reserve votes for another quarter-percentage point cut

The Federal Reserve on Wednesday slashed interest rates for the second time in as many months, pointing to a slowdown in hiring.

The central bank's Federal Open Market Committee reduced its benchmark by 25 basis points, to 3.75%-4.0%.

Fed Chairman Jerome H. Powell said the Fed tried to balance its twin mandate of stable prices and maximum employment in landing on a small cut.

"Conditions in the labor market appear to be gradually cooling, and inflation remains somewhat elevated," Mr. Powell said.

"There is no risk-free path for policy as we navigate this tension between our employment and inflation goals," he added. "Our framework calls for us to take a balanced approach in promoting both sides of our dual mandate."

Mr. Powell and nine other members voted in favor of the quarter-percentage point cut, which should give businesses and consumers more favorable terms on things like mortgages, car loans and borrowing for business expansions.

President Trump's recent appointment, Stephen Miran, voted in favor of a half percentage point cut, while another member, Jeffrey R. Schmid, voted to keep rates steady.

Mr. Powell said the central bank was flying blind due to the government shutdown and lack of formal economic figures. However, it pieced together a picture from other available data.

He said the Fed's policy is not on a "pre-set course," cautioning that another cut at the Fed meeting in December is "not a foregone conclusion."

U.S. stocks fell after Mr. Powell said the Fed might not cut rates again in December. The Dow Jones Industrial Average closed down 74 points, or 0.1 %, while the Nasdaq initially lost ground but closed up 130 points, or 0.5%.

Wednesday's decision to reduce rates comes on the heels of a similar cut at the Fed's September meeting, after months of inaction on rates.

Fed officials cut rates multiple times in 2024, as inflation cooled. This year, the central bank refused to reduce rates until September, when a slowdown in hiring became too urgent to ignore.

Central bankers had been afraid to cut rates because they thought Mr. Trump's tariffs would lead to higher consumer prices.

Their reluctance enraged Mr. Trump, who said Mr. Powell was dithering and forcing U.S. borrowers to accept unfavorable terms.

House Ways and Means Committee Chairman Jason Smith, Missouri Republican, called Wednesday's cut a welcome, though belated, move.

"The Federal Reserve was slow to fight Biden's sky-high inflation, and now the Fed has been slow to cut rates," he said. "As a result, many young families have been locked out of buying a home and small businesses have struggled to secure investments needed to grow and hire new workers."

Rep. Brendan Boyle, the ranking Democrat on the House Budget Committee, said the Fed had to cut rates to prop up a sagging economy under Mr. Trump.

"Nearly half of all states are now in or near recession, inflation is climbing, and the labor market is losing strength," said Mr. Boyle, of Pennsylvania. "This is all a direct result of Trump's reckless tariff taxes and his chaotic economic agenda."

Mr. Powell said the tariffs remain a bit of a wild card in whether prices will go up. However, he expects any price increases to be a one-time deal for impacted products as the levies are set in place.

The Fed is an independent agency that is supposed to be free from direct political pressure. Yet Mr. Trump has repeatedly scolded Mr. Powell and tried to shape the central bank to his liking.

The Supreme Court is set to review Mr. Trump's attempt to fire Fed Governor Lisa Cook, a Biden appointee, because of allegations that she committed mortgage fraud in 2021.

She allegedly got a $203,000 mortgage for a property in Michigan that she said was her "primary residence," but weeks later, she got another mortgage for $540,000 for a Georgia property that she listed as a primary residence.

Mr. Trump said Ms. Cook couldn't be trusted.

Her lawyers say she never intended to commit fraud and pointed to a separate loan estimate document that refers to the Georgia property as a "vacation home."

Ms. Cook's removal and replacement would give the White House a Trump-appointed majority on the Fed board.

The president appoints a Fed chairman every four years, but does not have the authority to fire the chairman.

Mr. Powell's term as chair ends in May 2026.

Treasury Secretary Scott Bessent recently said he narrowed a list of potential replacements to five names.

The candidates are current Fed Board members Christopher Waller and Michelle Bowman, former Fed Governor Kevin Warsh, White House National Economic Council Director Kevin Hassett and BlackRock Inc. executive Rick Rieder, Mr. Bessent told reporters.