Fed Cuts Rates Again Amid Rising Layoffs and Data Blackout

The Federal Reserve delivered its second consecutive interest rate cut on Wednesday, moving to ease monetary policy as mounting layoffs and the ongoing government shutdown heighten concerns about the U.S. economy.

Fed Chair Jerome Powell joined the 10–2 majority on the Federal Open Market Committee (FOMC) in voting for a quarter-point reduction, lowering the benchmark rate to a range of 3.75% to 4%, its lowest level since late 2022.

The two dissenting votes underscored the growing rift within the central bank: Trump-appointed Governor Stephen Miran pushed for a deeper half-point cut, while Kansas City Fed President Jeffrey Schmid preferred to keep rates unchanged.

Powell acknowledged the division, saying there were “strongly differing views” among policymakers on the appropriate path forward.

Markets React to Powell’s Cautious Tone

The Fed’s decision had been widely anticipated and mostly priced into markets. Mortgage rates, which had already dropped to a one-year low of 6.19%, may not fall further — and could even edge higher — following Powell’s remarks.

“Mortgage rates moved down notably in advance of the Fed’s meeting,” said Danielle Hale, Chief Economist at Realtor.com. “But today’s dissenting votes show that the Fed is unlikely to accelerate rate cuts unless economic conditions deteriorate significantly.”

Powell reinforced that caution during his post-meeting press conference, warning that another rate cut in December “is far from a foregone conclusion.”

Markets quickly turned negative. The Dow Jones Industrial Average fell by as much as 150 points during Powell’s remarks, while the 10-year Treasury yield climbed 7 basis points to above 4%, signaling potential upward pressure on borrowing costs.

A Balancing Act Between Jobs and Inflation

The Fed’s dual mandate—price stability and maximum employment—is facing renewed strain. Inflation remains elevated, but signs of weakness in the labor market are growing, complicating the policy outlook.

“There is no risk-free path as we navigate the tension between our employment and inflation goals,” Powell said. “It’s a challenging situation.”

After two years focused on curbing inflation, policymakers are now shifting attention toward protecting jobs amid reports of corporate downsizing.

In recent days, Amazon announced 14,000 corporate layoffs, UPS projected 48,000 job cuts by year’s end, and Targetand Paramount each announced roughly 1,000 reductions.

Powell noted that the Fed is closely monitoring the wave of layoffs and their connection to automation and AI adoption.
“You see companies saying they’re not hiring—or they’re cutting jobs—often citing AI,” he said. “We’re watching that very carefully.”

Policy in the Dark

Complicating matters, the government shutdown has suspended key economic reports on job growth and unemployment claims, leaving policymakers without crucial data.

Private-sector data offer partial insights but are considered less reliable, forcing the Fed to rely on fragmented information.

“We’re going to collect every scrap of data we can find,” Powell said. “It doesn’t replace official reports, but it gives us a picture.”

Outlook

The Fed’s latest cut underscores both its concern about weakening labor conditions and its desire to avoid overcorrecting before inflation is fully contained.
With the economy in flux and data streams darkened by the shutdown, Powell’s Fed is, for now, steering through uncertainty—guided as much by intuition as by evidence.