Impact of Lowered Interest Rates: Preserving U.S. Employment or Fueling Price Increases?
The United States Federal Reserve has recently lowered interest rates for the first time since December, with the aim of helping the ailing job market. This move comes as both employment and inflation are currently moving in opposite directions.
The Fed's focus seems to be more on the health of the labor market than the risk of rising prices. The unemployment rate, which rose to 4.3% in August 2025, reveals significant cracks in the labor market foundation. In contrast, inflation remains stable within expectations, allowing the Fed to prioritise easing monetary policy to support employment over aggressively combating inflation.
However, this move might potentially lead to an increase in prices. The Federal Reserve acknowledges this possibility but seems willing to take the risk in order to boost employment.
The decision to lower interest rates has been met with political pressure from President Donald Trump, who has been vocal about his desire for lower interest rates. The pressure on the Federal Reserve is also related to accusations of a challenge to its independence.
Meanwhile, the advancement of China's electric car industry continues unabated, and a hidden debt crisis in Senegal remains an issue of concern, but these topics are not directly linked to the current interest rate decision by the Federal Reserve.
