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The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring even as inflation stays elevated. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August, the Fed said in a statement issued Wednesday. More recent indicators are consistent with these developments.” The government hasn’t issued unemployment data after August because of the shutdown. The Fed is watching private-sector figures instead. Wednesday’s decision brings the Fed’s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades. Lower rates could, over time, reduce borrowing costs for mortgages, auto loans, and credit cards, as well as for business loans. The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Feds 2% target. Compounding its challenges, the central bank is navigating without the economic signposts it typically relies on from the government, including monthly reports on jobs, inflation and consumer spending, which have been suspended because of the government shutdown. The Fed has signaled it may reduce its key rate again in December but the data drought raises the uncertainty around its next moves. The Fed typically raises its short term rate to combat inflation, while it cuts rates to encourage borrowing and spending and shore up hiring. Right now its two goals are in conflict, so it is reducing borrowing costs to support the job market, while still keeping rates high enough to avoid stimulating the economy so much that it worsens inflation. Speaking to reporters after the Fed announced its rate decision, Fed Chair Jerome Powell said there were strongly differing views about how to proceed in December at the policy meeting and a further reduction in the benchmark rate is not a foregone conclusion. On Wednesday, the Fed also said it would stop reducing the size of its massive securities holdings, which it accumulated during the pandemic and after the 2008-2009 Great Recession. The change, to take effect Dec. 1, could over time slightly reduce longer-term interest rates on things like mortgages but won’t have much impact on consumer borrowing costs. The Fed purchased nearly $5 trillion of Treasury securities and mortgage-backed bonds from 2020 to 2022 to stabilize financial markets during the pandemic and keep longer-term interest rates low. The bond-buying lifted its securities holdings to $9 trillion. In the past three years, however, the Fed has reduced its holdings to about $6.6 trillion. To shrink its holdings, the Fed lets securities mature without replacing them, reducing bank reserves. In recent months, however, the reductions appeared to disrupt money markets, threatening to push up shorter-term interest rates. Two of the 12 officials who vote on the Feds rate decisions dissented, but in different directions. Fed governor Stephen Miran dissented for the second straight meeting in favor of a half-point cut. Miran was appointed by President Donald Trump just before the central banks last meeting in September. Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, voted against the move because he preferred no change to the Feds rate. Schmid has previously expressed concern that inflation remains too high. Trump has repeatedly attacked Powell for not reducing borrowing costs more quickly. In South Korea early Wednesday he repeated his criticisms of the Fed chair. Hes out of there in another couple of months, Trump said. Powells term ends in May. On Monday, Treasury Secretary Scott Bessent confirmed the administration is considering five people to replace Powell, and will decide by the end of this year. Powell was asked about the impact of the government shutdown, which began on Oct. 1 and has interrupted the distribution of economic data. Powell said the Fed does have access to some data that give it a picture of whats going on. He added that, If there were a significant or material change in the economy, one way or another, I think wed pick that up through this. But the Fed chair did acknowledge that the limited data could cause officials to proceed more cautiously heading into its next meeting in mid-December. “Theres a possibility that it would make sense to be more cautious about moving (on rates). Im not committing to that, Im just saying its certainly a possibility that you would say we really cant see, so lets slow down. September’s jobs report, scheduled to be released three weeks ago, is still postponed. This month’s hiring figures, to be released Nov. 7, will likely be delayed and may be less comprehensive when they are finally released. And the White House said last week that October’s inflation report may never be issued at all. Before the government shutdown cut off the flow of data, monthly hiring gains had weakened to an average of just 29,000 a month for the previous three months, according to the Labor Department’s data. The unemployment rate ticked up to a still-low 4.3% in August from 4.2% in July. More recently, several large corporations have announced sweeping layoffs, including UPS, Amazon, and Target, which threatens to boost the unemployment rate if it continues. Powell said the Fed is watching the layoff announcements very carefully. Meanwhile, last weeks inflation report released more than a week late because of the shutdown showed that inflation remains elevated but isnt accelerating and may not need higher interest rates to tame it. The government’s first report on the economy’s growth in the July-September quarter was scheduled to be published on Thursday, but will be delayed, as will Friday’s report on consumer spending that also includes the Fed’s preferred inflation measure. Christopher Rugaber, AP economics writer
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Paramount is the latest company to join the bloodbath of layoffs this week. The entertainment giant began cutting around 1,000 workers on Wednesday, with twice that many pink slips expected in the days to come. In a memo to staff, new Paramount CEO David Ellison characterized the reductions, which will ultimately shrink the company by 10%, as a necessary step for the companys long-term growth. In some areas, we are addressing redundancies that have emerged across the organization, Ellison wrote in a memo obtained by The Guardian and other outlets. In others, we are phasing out roles that are no longer aligned with our evolving priorities and the new structure designed to strengthen our focus on growth. Paramount-owned CBS News will reportedly see around 100 employees cut. Those layoffs were reportedly planned prior to the networks decision to name Bari Weiss as its editor-in-chief, inviting the controversial media figure and anti-woke provocateur to reshape the network in her image. The layoffs, while significant, werent totally unexpected. After Skydances $8.4 billion merger with Paramount was finalized over the summer, the companys new leadership signaled it planned to cut around $2 billion in costs by trimming its workforce. Last year, Paramount cut 15% of its U.S. workforce in the lead-up to the Skydance deal. Paramount joins Amazon, UPS, Target and General Motors, which have all announced major layoffs this week. On Tuesday, Amazon said that it would cut around 14,000 corporate jobs, citing investments in AI and quickly fulfilling CEO Andy Jassys own prophecy that the technology would reduce its need for human workers in the future. Skydances empire grows Layoffs arent the only big move Paramount is making under Skydances banner. The company is already working on an offer to buy Warner Bros. Discovery Inc., which owns CNN, DC Studios, and HBO, among other major media properties. Skydance, which merged with Paramount in August, is led by David Ellison, the son of Oracle cofounder Larry Ellison. By closing the Paramount deal, Skydance brought Paramount Pictures, Paramount+, CBS, CBS News, Comedy Central, Nickelodeon, and Showtime and other entertainment brands under its wing. If the company succeeds in a bid to buy Warner Bros., it would also pick up Warner Bros. Pictures, DC Comics, Turner Classic Movies, New Line Cinema, the Discovery Channel, the Travel Channel, TBS, TNT, and a handful of theme parks. Paramount is doing some belt tightening around its workforce, but the companys new leadership is splashing out big in other areas. Under Ellison, Paramount swiftly announced a $7.7 billion deal to become the UFCs streaming partner. The arrangement reportedly doubles what ESPN was paying for rights to air UFC matches. Skydance is building its new media empire at breakneck speed, but its next deal might not come as quickly. Last week, Warner Bros. Discovery turned up its nose at a $60 billion offer from Paramount Skydance, opting to play the field instead. Any merger would interrupt the entertainment giants plans to split itself into two public companies, one for streaming and one for traditional TV, by next year. Skydance Paramount may have been rebuffed once, but the Ellison familys closeness with Trump gives the company a strong angle on a deal. While regulatory hurdles often derail major mergers or cause them to stall out, a green light for a Warner Bros. deal would be almost assured under the Trump administration, which has been eager to reward loyalists and punish perceived enemies in the private sector.
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And the layoffs keep coming. General Motors joins Amazon and Paramount this week, announcing on Wednesday it will be laying off 1,750 workers in Michigan and Ohio, in response to the downturn in U.S. electric vehicle (EV) market. The Detroit News first reported the news. Shares in the automotive maker (NYSE: GM) were down less than 1% in midday trading on Wednesday. The company said those cuts include 1,200 workers in Detroit at the company’s electric vehicle plant and another 550 employees at Ohios Ultium Cells battery cell plant. The company is also instituting temporary layoffs for some 850 workers at the Ohio plant and another 700 workers in Tennessee, General Motors confirmed to Fast Company. Federal electric vehicle (EV) tax credits of up to $7,500 expired at the beginning of this month following the signing of the President Donald Trump’s One Big Beautiful Bill Act (OBBBA). Now automakers are bracing for a decline in EV sales in the U.S. “In response to slower near-term EV adoption and an evolving regulatory environment, General Motors is realigning EV capacity,” the company said in an emailed statement to Fast Company. “Despite these changes, GM remains committed to our U.S. manufacturing footprint, and we believe our investments and dedication to flexible operations will make GM more resilient and capable of leading through change.” Impacted employees may be eligible for SUBpay and benefits in accordance with the National GM-UAW Agreement, GM said. General Motors will adjust production at its Ohio Ultium Cells plant and will temporarily pause battery cell production at the Spring Hill, Tennessee and Warren, Ohio facilities in January 2026, but anticipate resuming operations by mid-2026. (Impacted employees may be eligible to continue receiving a significant portion of their regular wages or salary, plus benefits.) General Motors financials Last week, General Motors’ third-quarter earnings results beat expectations, with revenue coming in at $48.59 billion versus an expected $45.27 billion, and earnings per share (EPS) of $2.80 adjusted, beating expectations of $2.31. The company also raised its financial guidance for the year.
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