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 Labour Department released 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.