Two central bankers dissent for different economic reasons.

Jerome Powell, chairman of the Federal Reserve Board, is shown in Washington on Friday. The Federal Reserve lowered borrowing costs Wednesday by a quarter percentage point. Caroline Gutman - NYT.

By Colby Smith | The New York Times

The Federal Reserve cut interest rates for a second time this year on Wednesday, despite officials having only a partial view of how the economy is faring because of the shutdown.

The central bank voted to lower borrowing costs by a quarter of a percentage point as the lapse in funding for the government stretched into its fifth week. Until lawmakers reach a deal, the Bureau of Labor Statistics and other agencies have stopped collecting, analyzing and publishing official statistics tracking the jobs market, consumer prices, spending and a range of other metrics.

Wednesday's decision, which brought interest rates below 4% for the first time since late 2022, was a divisive one. Two officials dissented for different reasons. Stephen Miran, the newest member of the Fed's board of governors, voted for a larger, half-point reduction, like he did in September. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, wanted the Fed to instead hold interest rates steady at the previous level of 4% to 4.25%.

In its policy statement, the Fed seemed to adopt a rosier view of economic activity but stressed that the labor market remained vulnerable. While it noted that the economy was "expanding at a moderate pace" and that the unemployment rate was still low, it said stressed that "downside risks to employment rose in recent months."

Typically, the Fed cues off the incoming official data to help justify its interest-rate decisions, while also citing alternative measures and surveys related to economic activity. But the shutdown has effectively created a data blackout for the Fed, at least from government sources. The Bureau of Labor Statistics released September's consumer price index report over a week late Friday in order to meet a deadline for Social Security cost-of­ living adjustments. But that is likely to be the last major data release from the agency for a while.

The White House recently warned that the October CPI report might not be published since data for the month is not being collected given the shutdown. September's job report and all subsequent monthly releases have also been indefinitely delayed.

The Fed's decision to lower interest rates again Wednesday reflects the central bank's belief that it can afford to focus on the risks confronting the labor market and take steps to shore it up even though inflation is moving away from its 2% target.

Jerome Powell, the Fed's chair, has acknowledged that this is a risky strategy that could result in the central bank either inadvertently fueling inflation or causing undue harm to the labor market depending on how fast it lowers interest rates.