For the second time this year, the US Federal Reserve has lowered its key interest rate. This is in response to signs of weakness in the labor market. Inflation, however, remains stubbornly high.

The US Federal Reserve has cut its key interest rate again. The Fed lowered the so-called Fed Funds Rate by a quarter point to a new range of 3.75 to 4.0 percent.

In September, the Fed cut its key interest rate for the first time this year. As six weeks prior, the central bank justified its move with signs of weakness in the labor market.

US President Donald Trump had repeatedly called for significantly larger interest rate cuts, for example to make mortgage loans cheaper.

Persistent inflation exacerbates the dilemma

The central bank thus finds itself in a difficult dilemma. The latest inflation data for September, at 3.0 percent, remained significantly above its medium-term target of 2.0 percent. On the other hand, increasing cracks were appearing in the previously robust labor market, justifying a looser monetary policy.

Although the central bank cannot access the full set of official economic data due to the ongoing shutdown, observers highly expect another interest rate cut at the central bank meeting in December.