The US Federal Reserve pushed forward with an interest rate cut as inflation fears continue to take a backseat to concerns about a stalling labour market.

It came despite the US government shutdown, nearing its one-month mark, which delayed official data and left central bankers “flying blind” about the job market, economists said.

The US central bank said on Wednesday it was lowering the target for its key lending rate by 0.25 percentage points, putting it in a range of 3.75% to 4%.

The Fed last month cut interest rates for the first time since last December. Economists expected the move to jump-start further reductions, but the data drought means the trajectory for future cuts looks murky.

Two voting members on the Fed’s committee opposed the central bank’s decision on Wednesday.

Stephen Miran, who is on leave from his post leading US President Donald Trump’s Council of Economic Advisers, voted for a larger 0.5 percentage point cut. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, voted to hold rates steady.

The Fed’s latest cut brings the target for its key lending rate down to its lowest level in three years, easing borrowing costs across the US.

A slowdown in job hiring prompted the Fed to restart its rate cutting cycle in September. In a policy statement on Wednesday, the central bank reiterated that “job gains have slowed this year” and that the unemployment rate, though still low through the end of summer, has now “edged up”.

At a press conference following the cut, Fed chair Jerome Powell called the labour market “less dynamic and somewhat softer” than earlier this year, pointing in part to lower immigration.

Still, he said weakness in the job market does not appear to be accelerating.

But the ongoing government shutdown has stalled the release of the official monthly jobs report for September, limiting central bankers’ insight into how the labour market has fared since their last meeting.

Alternative sources including private-sector data have pointed to an ongoing trend of sluggish hiring. The US economy lost 32,000 jobs in September, according to data from the payroll firm ADP.

The Labor Department did release inflation data for September last week. The figure, at 3% year-over-year, was slightly lower than economists had predicted, reinforcing the likelihood that rate-setters would vote to lower borrowing costs again.

Fears about tariff-driven inflation had taken centre stage earlier this year when Trump pushed forward with sweeping tariffs on many of the country’s largest trading partners.

Inflation is still above the Fed’s 2% target. But while tariffs appear to be boosting some consumer prices, the milder-than-expected inflation reading for September allowed the Fed to focus on boosting the labour market by lowering rates, economists at Bank of America noted.

“Inflation away from tariffs is actually not so far from our 2% goal,” Powell told reporters. He said the hope among central bankers is that tariffs only lead to one-time price increases for certain consumer products.

The Fed on Wednesday also said it will stop shrinking its balance sheet – its portfolio of government debt and mortgage-backed securities – on 1 December.

For more than three years, the central bank has undertaken a process to unwind its purchases during the pandemic and previous financial crises, when it aimed to boost the economy and bring down interest rates. That unwinding process is now poised to end, as widely anticipated, amid signs of stress in financial markets.

‘Strongly differing views’ on a December cut

Wall Street had been betting on another quarter-point interest rate cut from the central bank at its last meeting of the year in December.

But those bets fell after Powell on Wednesday stressed that a December cut is “not to be seen as a foregone conclusion – in fact, far from it”.

“Future moves are becoming more contentious,” said Michael Pearce, deputy chief US economist at Oxford Economics. “We expect the Fed to slow the pace of cuts from here.”

A lot might still change before the Fed’s next meeting. It could receive three new jobs reports, which could “significantly change perceptions of the labour market for better or worse”, Michael Feroli, chief US economist at JP Morgan, wrote in a note.

At the same time, if the government shutdown persists and continues to limit the availability of government data, that could also encourage the Fed to sit on its hands at the end of the year.

“What do you do if you’re driving in the fog? You slow down,” Powell said.

He told reporters that “there were strongly differing views about how to proceed” among members of the Fed’s committee, and the decision will ultimately depend on incoming economic data.

“We’re going to collect every scrap of data we can find,” Powell said.

The Fed chair has been under pressure from President Trump, who has repeatedly called on him to lower interest rates.

Trump on Monday floated the possibility that he will announce a replacement for Powell, whose term ends next May, by end the end of this year.

The US and South Korea have reached a broad trade deal, both countries have said following talks between their leaders.

South Korea’s presidential aide, Kim Yong-beom, said the two sides will reduce reciprocal tariffs from 25% to 15%, as was agreed earlier this year.

South Korea will also invest $350bn in the US, including $200bn in cash investment and $150bn in shipbuilding, Kim said.

US President Donald Trump, who is currently on a week-long trip in Asia, said the deal was “pretty much finalised” at a dinner following the discussions, which lasted almost two hours. He did not give further details.

“We had a tremendous meeting today with South Korea”, Trump said of his discussions with South Korean President Lee Jae Myung, adding that “a lot was determined”.

“We discussed some other things to do with national security et cetera. And I think we came to a conclusion on a lot of very important items.”

Both sides had played down the prospect of a breakthrough ahead of Wednesday’s talks – disappointing many in South Korea’s electronics, chip and auto industries, which had been hoping for some clarity amidst the tariff chaos.

Trump had slapped a tariff rate on Seoul of 25% earlier this year – which Lee managed to negotiate down to 15%, after Seoul said it would invest $350bn in the US and buy $100bn worth of liquified natural gas.

But the White House later increase its demands as part of the trade talks, with Trump pushing for cash investments in the US.

Both countries have historically been key allies – but tensions spiked after hundreds of South Koreans were detained in an immigration raid in the US last month.

Trump will next meet his Chinese counterpart Xi Jinping in on Thursday on the sidelines of a summit of the Asia-Pacific Economic Cooperation (Apec) which is taking place in Gyeongju.

China’s foreign ministry has confirmed the meeting, which will take place in the city of Busan on Thursday, a short flight away from Gyeongju.

The US president said on Wednesday that he was “looking forward” to the meeting.

“We’ve been talking a lot over the last month and I think we’re going to have something that’s gonna be very, very satisfactory to China and to us.”

This will be the two leaders’ first face to face meeting since Trump assumed office in 2025 and imposed tariffs on every country in the world.

Addressing a group of CEOs in Gyeongju on Wednesday, Trump said that he believes the US is “going to have a deal” with China and it will be “a good deal for both”.

He also praised the Apec countries for making the global trading system, which he said had been “broken” and “in urgent need of reform”, fairer.

“Economic security is national security,” Trump says. “That’s for South Korea, that’s for any country.”

Golden crowns and grand orders

Ahead of Wednesday’s talks with President Lee, Trump had been greeted by an honour guard and gifts that included a golden crown.

“I’d like to wear it right now,” Trump had said of the crown.

He also received the Grand Order of Mugunghwa, South Korea’s highest decoration.

He’s the first US president to receive the award, which was given “in recognition of his contribution to peace on the Korean Peninsula”, the South Korean presidential office said.

Both leaders took part in a working lunch – which was followed by a private meeting in the afternoon.

US forces have killed 14 people in strikes on four alleged drug boats in the Pacific, Defence Secretary Pete Hegseth said.

Mexico’s navy says it is still searching for a lone survivor approximately 400 miles (643km) from the Pacific coastal city of Acapulco.

It is the latest in a series of attacks on boats the US says have been carrying drugs in both the Pacific and Caribbean.

The latest strikes in the eastern Pacific, which Hegseth said happened on Monday at the direction of President Donald Trump, mark an escalation in what it has cast as a campaign to stop narcotics from entering the US.

The strikes have drawn condemnation in the region and experts have questioned their legality. Members of the US Congress, both Democrats and Republicans, have also raised concerns and questioned the president’s authority to order them.

Mexican President Claudia Sheinbaum told her morning press conference “we do not agree with these attacks”. She said she had asked the country’s foreign minister, as well as representatives of the navy, to meet the US ambassador.

“We want all international treaties to be respected,” she added.

At least 57 people have now been killed in the strikes, which has led to increasing tensions between the US and the governments of both Colombia and Venezuela.

Most strikes have taken place off the coast of South America, in the Caribbean, but recently the US has turned its attention to the Pacific Ocean as well.

In a statement on X, Hegseth said the four vessels that were hit on Monday “were known by our intelligence apparatus, transitioning along known narco-trafficking routes and carrying narcotics”.

He added that eight “narco-terrorists” were killed in the first strike. Four and three were killed in the following two strikes.

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One person survived the strikes. According to Hegseth, Mexican search-and-rescue authorities “accepted the case and assumed responsibility for coordinating the rescue.”

The condition of the survivor or his current whereabouts are unclear. Mexico’s navy said in a statement that it had dispatched a patrol boat and an aircraft to conduct search operations to “safeguard human life at sea”.

Hegseth’s post included videos that show several vessels catching fire after being struck by US munitions.

“The department has spent over two decades defending other homelands,” he wrote. “Now, we’re defending our own.”

At least four of the strikes have so far taken place in the Pacific, which is a far more significant drug-trafficking corridor, with the rest taking place in the Caribbean.

President Trump has said he has the legal authority to continue bombing boats in international waters, but suggested last week that he may seek approval from Congress if the campaign is expanded to include targets on land.

Trump has said he is “totally prepared” to strike land-based targets, which would mark a significant escalation in the campaign.

The strikes, however, have drawn criticism from international law experts and both the Venezuelan and Colombian governments.

In an interview with the BBC’s Newsday programme last week, Colombian Deputy Foreign Minister Mauricio Jaramillo said the strikes were “disproportionate and outside international law”.

Jaramillo said those on the vessels had “no possibility to defend themselves” and were struck with “no process” and “no judicial order”.

The strikes also come as tensions ratchet up with both governments. The US has placed sanctions on Colombian president Gustavo Petro, accusing him of failing to curb drug trafficking and allowing cartels to “flourish”.

In the Caribbean, the US has deployed troops, aircraft and naval vessels and last week ordered the world’s largest warship – the USS Gerald R Ford – to the area.

Trump has accused Venezuelan President Nicolas Maduro of being the leader of a drug-trafficking organisation, which he denies, and there are fears in Venezuela that the US military build-up is aimed at removing the long-time opponent of Trump from power.

The country’s attorney general told the BBC there is “no doubt” that Trump is trying to overthrow the Venezuelan government. He accused the US of hoping to seize the country’s natural resources, including reserves of gold, oil and copper.

The US is among many nations that do not recognise Maduro as Venezuela’s legitimate leader, after the last election in 2024 was widely dismissed as neither free nor fair. Opposition tallies from polling stations showed its candidate had won by a landslide.