The Federal Reserve on Wednesday lowered its benchmark interest rate by a quarter percentage point to a new range of 3.75% to 4%, even as policymakers grapple with a lack of key economic data due to the ongoing US government shutdown.
The rate cut, approved by most Fed officials, came despite uncertainty over the health of the world’s largest economy, with inflation and employment reports unavailable in recent weeks. The central bank signaled that further easing could be delayed if the data blackout continues.
“If the data blackout persists for much longer — obscuring how the world’s largest economy is faring — central bankers may need to hold off on any rate cuts until there’s better clarity,” the Fed said in its statement.
The decision was not unanimous. Fed governor Stephen Miran, a second-term Trump appointee who joined the board last month, voted for a larger half-point cut, while Kansas City Fed president Jeffrey Schmid voted to leave rates unchanged.
In a notable policy shift, the Fed also announced it will stop shrinking its balance sheet on December 1, marking the full end of quantitative tightening. Starting that date, the central bank will roll over all maturing Treasuries and reinvest all agency and mortgage-backed securities payments into Treasury bills.
The move is intended to stabilize financial conditions after months of tightening that drained liquidity from the banking system.
Markets were somewhat muted in reaction, with the Dow Jones up 0.3%, the S&P 500 up 0.2%, and the Nasdaq sitting 0.5% ahead.