US Fed opens prospect of first rate cut, flags unemployment risk

HOUSTON (ICIS)–The Federal Reserve flagged on Wednesday the threat of rising unemployment, opening the prospect of the first rate cut since it started its campaign to get inflation back to its 2% target.

“The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate,” the Federal Reserve said.

The Federal Reserve is charged with keeping inflation under control and promoting maximum employment.

If the Fed is concerned about unemployment rising too quickly, it could loosen monetary policy by lowering the benchmark federal funds rate.

It voted on to keep the rate steady at 5.25-5.50%. However, its comments opened the prospects of a cut during its next meeting scheduled for September 18.

In its latest statement, the Fed noted that the labor market has softened.

Job gains have moderated, and the unemployment rate has moved up, although it remains low, the Fed said.

Also, the fed said that inflation remains “somewhat elevated”.

During its last rate-setting meeting in June, the Fed said that job gains have remained strong, and the unemployment rate remained low. Moreover, it said that inflation remained elevated without qualifying it.