The Federal Reserve cut its key interest rate by a quarter-point Wednesday and projected it would do so twice more this year as concern grows at the central bank about the health of the nation’s labor market. The move is the Fed’s first cut since December and lowered its short-term rate to about 4.1%, down from 4.3%. Fed officials, led by Chair Jerome Powell, had kept their rate unchanged this year as they evaluated the impact of tariffs, tighter immigration enforcement, and other Trump administration policies on inflation and the economy. The only dissenter was Stephen Miran, the recent Trump-appointee.
The Federal Reserve has cut its benchmark interest rate for the first time in nine months. Since the last cut, progress on inflation has slowed while the labor market has cooled and Wall Street has rallied. That means Americans are dealing with both high prices and a challenging job market. The federal funds rate, set by the Federal Reserve, is the rate at which banks borrow and lend to one another. The rates that consumers pay to borrow money aren’t directly linked to this rate. But shifts in Fed policy affect what people pay for credit cards, auto loans, mortgages, and other financial products.
Shoppers increased their spending at a better-than-expected pace in August from July, helped by back-to-school shopping, even as President Donald Trump’s tariffs are starting to hurt the job market and lead to price increases. Retail sales rose 0.6% last month from July, when sales were up a revised 0.6%, according to the Commerce Department’s report. In June, retail sales rose 0.9%, the government agency said. The August performance, announced Tuesday, was also likely helped by the continued efforts by Americans to keep pushing up purchases ahead of expected price increases. The retail sales increases followed two straight months of spending declines in April and May.
Wall Street coasted to the finish of its best week in the last five. The S&P 500 barely budged on Friday and edged down by less than 0.1% from its latest all-time high. The Dow Jones Industrial Average dipped 0.6%, and the Nasdaq composite rose 0.4%. Stocks have rallied to records with expectations that the Federal Reserve will cut interest rates next week for the first time this year. Treasury yields rose in the bond market to recover some of their sharp drops from earlier in the week, which came after economic reports seemed to cement the case for a rate cut.
Wall Street rolled to more records after mixed data on the economy cemented expectations for coming cuts to interest rates. The S&P 500 rose 0.8% Thursday and set an all-time high for a third straight day. The Dow Jones Industrial Average rallied 1.4%, and the Nasdaq composite climbed 0.7%. Treasury yields eased in the bond market following the reports on joblessness and inflation, as traders bet the Federal Reserve will have to cut interest rates for the first time this year at its meeting next week. European stocks rose after the European Central Bank held its main interest rate steady.
Inflation rose last month as the price of gas, groceries, and airfares jumped, while a measure of layoffs also increased, putting the Federal Reserve in a tough spot as it prepares to cut rates at its meeting next week despite persistent price pressures. The reading is the last the Fed will receive before its Sept. 16-17 meeting, when policymakers are widely expected to cut their short-term rate to about 4.1% from 4.3%. Still, the new inflation data underscores the challenges the Fed is facing. Inflation remains stubborn while the job market is weakening, diverging trends that would require polar reactions from Federal Reserve policymakers to address.
US inflation rose last month as gas, food costs jumped.
Wall Street inched higher to set more records. The S&P 500 added 0.3% Wednesday and set an all-time high for a second straight day. The Dow Jones Industrial Average fell 0.5%, and the Nasdaq composite edged up by less than 0.1% after both likewise set records the day before. Oracle led the way with its best day since 1992 after giving a stunning forecast for revenue growth in upcoming years, but a drop for Apple weighed on indexes. Treasury yields eased in the bond market following a surprisingly encouraging report on inflation at the wholesale level.
Apple has rolled out its next generation of iPhones that includes a new ultra-thin model and a slight price hike for one of its high-end models, while the company feels the squeeze of a global trade war. The iPhone 17 line-up includes a new slimmed-down model that will adopt the “Air” name that Apple already uses for its sleekest iPads and Mac computers. The new iPhones are the first to be released since President Donald Trump returned to the White House and unleashed a barrage of tariffs, in what his administration says is an attempt to bring overseas manufacturing back to the U.S. — a crusade that has thrust Cook into the hot seat.
U.S. stocks rose to more records. The S&P 500 gained 0.3% Tuesday and topped its all-time high set last week. The Dow Jones Industrial Average added 196 points, and the Nasdaq composite climbed 0.4%. Both likewise set records. UnitedHealth helped lead the market after saying it plans to stick with its 2025 profit forecast. Stocks have broadly been climbing on expectations that the Federal Reserve will cut interest rates for the first time this year at its next meeting in a week. Another report indicating a slowing U.S. job market helped strengthen those expectations.