The Powell-led panel noted that downside risks to employment have risen. The admission comes in the backdrop of US jobless claims jumping to its highest in the last four years. The unemployment rate also rose to a nearly four-year high of 4.3% in August.
“Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low,” the FOMC said.
As per the Fed’s median forecast, the unemployment rate is likely to stand at 4.5% in 2025, and at 4.4% in 2026.
“Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the FOMC noted.
Notably, Fed had kept its benchmark lending rates unchanged in the range of 4.25-4.5% since December. The pause came with the onset of Donald Trump’s presidency, as his policies that targeted imports and immigration were expected to trigger inflation.
However, the prospects of a tilt in Fed’s view became clearer with the release of recent economic data, that showed benign inflation along with a dwindling pace of job growth.
The Powell-led panel has also faced a barrage of criticism from Trump, who has questioned the Fed’s decision-making and blamed it for slowing the country’s growth by keeping the interest rates high.
The pressure on Fed was evident in July FOMC meeting as well, when Governors Christopher Waller and Michelle Bowman had dissented against the majority’s decision to keep the rates unchanged.
