Federal Reserve Cuts Rates Amid Weak Labour Market Data

Highlights:

• Rate cut: US Federal Reserve lowers benchmark rate by 25 bps to 4–4.25% at the time of writing, first return to this range since Dec 2022.
• Labour strain: Only 22,000 jobs added in August vs. 73,000 in July; unemployment rises to 4.3%.
• Market impact: Dow +260 pts, Nasdaq & S&P500 slip; gold down 0.8% to US$3,660/oz, silver -2%, 10Y yield climbs to 4.06%.

Quarter-Point Rate Cut Announced

The US Federal Reserve has lowered its benchmark interest rate by 25 basis points, setting the new range at 4% to 4.25% at the time of writing. Returning to levels not witnessed since December 2022, the move signals a noteworthy change in direction. The decision was widely expected as policymakers responded to weakening labour market conditions and slowing economic momentum.

Labour Market Pressures

Recent employment data underscored the Fed’s decision, with only 22,000 jobs added in August, sharply down from 73,000 in July. The unemployment rate also ticked higher, rising from 4.2% in July to 4.3% in August. The Fed’s statement noted that further adjustments will depend on incoming data, economic outlook, and balance of risks.

Market Reaction

Equity markets in the US delivered a mixed performance midweek — the Dow climbed 260 points, but the S&P 500 and Nasdaq edged lower. Despite the subdued reaction, US markets have enjoyed a strong rally throughout 2025, buoyed by enthusiasm for artificial intelligence stocks even as broader economic data weakens.

Impact on Commodities and Bonds

Following the Fed’s decision, precious metals saw a pullback after volatile trading sessions. Gold closed 0.8% lower at US$3,660 per ounce, while silver dropped 2%. On the bond front, the US 10-year Treasury yield rose 1.3% to 4.06%, reflecting investor caution and concerns over sustained deflationary pressures.

Dollar Weakness Persists

The US dollar index also fell further as traders digested the rate cut and weak labour trends. Analysts note that high debt levels, persistent inflation, and a slowing jobs market have clouded confidence in the US economy, leaving monetary easing as the Fed’s primary tool to maintain stability.

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