Fed Cuts Rates, Halts Balance‑Sheet Runoff

The Federal Reserve cut its policy rate by 25 basis points to a 3.75%–4.00% target—its second reduction this year—citing slowing job gains and a rising unemployment rate even as inflation remains elevated. Policymakers said they are closely monitoring labor‑market indicators, inflation pressures and international and financial developments but noted a government shutdown has paused some official data releases, prompting greater reliance on private‑sector indicators. The FOMC also voted to stop further shrinking its balance sheet and to reinvest proceeds from maturing mortgage‑backed securities into Treasuries to ease money‑market strains and support liquidity. The decision was split 10–2, with Governor Stephen Miran favoring a larger half‑point cut and Kansas City Fed President Jeffrey Schmid preferring to hold rates; Chair Jerome Powell warned a December cut is not guaranteed. Markets reacted to the mixed signals, with stocks and Treasury yields moving as the Fed emphasized that future easing will be data‑dependent and contested among policymakers.