The US Federal Reserve cut its benchmark interest rate by a quarter of a percentage point on Wednesday, lowering the federal funds target to a range of 3.75% to 4.0%. Chair Jerome Powell announced the decision at the close of the two-day Federal Open Market Committee meeting in Washington.

The move followed months of mixed inflation data, with the Labor Department reporting that consumer prices rose sharply in August due to higher energy costs. Powell said the committee judged that risks to employment had grown enough to justify easing, even as headline inflation remained above the central bank's 2% target.

The FOMC pointed to slowing job growth and softer hiring across services and manufacturing. Powell told reporters that the committee would move "meeting by meeting" and warned markets against assuming a rapid sequence of further cuts, citing energy-driven price pressures linked to tensions in the Gulf.

Equity markets had largely priced in the reduction, and Treasury yields moved modestly after the release. Economists at Goldman Sachs and Morgan Stanley had forecast the quarter-point cut, though several expected Powell's guidance to be more hawkish than markets hoped, limiting the scope for another reduction before December.

"We are prepared to adjust the stance of policy as appropriate," Powell said. "But we will not be complacent about inflation while energy costs remain elevated."