WASHINGTON / LONDON (IT BOLTWISE) – The US Federal Reserve plans to cut interest rates again to support the weakening labor market. Despite ongoing concerns about inflation, the focus is on avoiding an increase in unemployment. Major companies like Amazon and Target have already announced job cuts, further adding to the uncertainty.
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The Federal Reserve faces the challenge of stabilizing the labor market while inflation remains above desired levels. Jerome Powell and his colleagues plan to cut interest rates by a quarter of a percentage point to support the economy. The move would be the second rate cut in six weeks, after previously keeping rates stable to combat inflation.
The Fed’s decision will be influenced by recent announcements by major companies cutting jobs. Amazon plans to cut 14,000 jobs, while Target is cutting 1,000 jobs and leaving another 800 unfilled. The federal government also cut around 100,000 jobs in the first eight months of the year, and more cuts are expected to follow in October.
Economic uncertainty is exacerbated by the government shutdown, which is hindering the release of official economic data. A report on employment developments in September is still pending and it is unclear whether the October figures will even be recorded. The September inflation rate released last week was milder than expected, reinforcing expectations that the Fed will focus more on the labor market.
Fed Governor Chris Waller stressed his focus is on the labor market as employment gains have weakened this year and employment may already be shrinking. Despite the impact of President Trump’s tariffs on prices, Waller does not expect any long-term effects on inflation. In the absence of official data, analysts are turning to alternative indicators, such as payroll company ADP’s report showing a slight increase in private hiring in October.
The stability of the labor market is crucial for consumer spending, which is a key driver of the economy. As long as workers are receiving paychecks, they can continue to spend, but a stall in job growth and a spike in layoffs could weigh on the economy. Nela Richardson, chief economist at ADP, points out that consumer resilience is based on a relatively strong labor market, even though growth has slowed compared to the start of the year.
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