The US Federal Reserve has proceeded with another interest rate cut, reducing its key lending rate by 0.25 percentage points to a range of 3.75% to 4%. This decision, announced on Wednesday, comes as concerns over a slowing labour market overshadow fears of inflation. Economists noted that the ongoing US government shutdown, now nearing its one-month mark, has left central bankers ‘flying blind’ due to delays in official job market data. The Fed last cut rates in September, marking the first reduction since December 2022, in response to sluggish hiring trends. Chairman Jerome Powell highlighted ‘downside risks’ to unemployment as a key factor. Despite the shutdown, the Labor Department released September inflation data last week, showing a 3% year-over-year increase, slightly below expectations. This reinforced the likelihood of further rate cuts. Earlier this year, fears of tariff-driven inflation dominated discussions as President Trump imposed sweeping tariffs on major trading partners. While inflation remains above the Fed’s 2% target, the milder-than-expected September reading allowed policymakers to prioritize labour market concerns. Bank of America economists noted that ‘policymakers are slightly more focused on downside risks to the employment mandate.’ The latest cut brings the key lending rate to its lowest level in three years. Wall Street anticipates another quarter-point reduction at the Fed’s December meeting, with investors pricing in an over 80% chance. However, JP Morgan’s chief US economist, Michael Feroli, cautioned that upcoming jobs reports could ‘significantly change perceptions of the labour market.’ Meanwhile, President Trump has criticized Powell for not cutting rates faster and hinted at replacing him before his term ends in May 2024.