With up unemployment, US BC reduces interest rate by 0.25 point

Unemployment in the country rose from 4.2% in July to 4.3% in August, according to data from the Department of Labor. It is the highest level since October 2021. The economy created 22,000 new jobs last month, when the expectation was to create 75,000.

There is a lot of doubt about the future behavior of inflation. It is above the goal and had been preventing the Fed from reducing interest rates in recent months. In August, the consumer price index recorded inflation from 0.4%, bringing the accumulated variation from 12 months to 2.9%.

The uncertainties about price directions are mainly due to the effects of Trump’s tariff. Since February, the US President has been imposing new rates on products imported from other countries around the US. These rates make goods purchased from abroad, but only now the consequences of this new policy are beginning to appear, and it is not known as far as they go.

Faced with the resistance of the Fed in cutting interest, Trump has been increasing the pressure on the bench. It has already threatened to dismiss the institution’s president, Jerome Powell and recently dismissed one of his directors, Lisa Cook, who had been voting for the maintenance of interest. On Monday (15), the US court denied the removal of Cook because the law that created the Fed allows directors to be removed only by “just cause”. Trump promised to resort to the Supreme Court. Today, Cook voted for the cut of 0.25 percentage point.

High interest rates help control inflation because they discourage consumers and companies to take loans and spend, which warms the economy and makes prices rise. The opposite effect of reducing rates to stimulate the economy is more difficult and time consuming to achieve.

How does the Fed decision today affect Brazil?

With lower interest rates in the US, large international investors tend to leave the country and seek more interesting returns in other markets. Brazil is one of the favorite destinations, because, at this time, it has basic interest of 15% per year.