The U.S. Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday, its first reduction this year, as policymakers moved to shield the cooling economy from rising risks.
The decision, announced yesterday at the end of the Fed’s September meeting, lowered the federal funds target range to 4.00%–4.25% from 4.25%–4.50%. One policymaker dissented, preferring a deeper half-point cut.
Fed Chair Jerome Powell said the move was aimed at supporting the labor market as job gains slow and economic activity shows signs of softening. He cited weakening payroll growth and rising risks to employment, warning that holding rates too high for too long could tip the economy into a sharper downturn.
The cut marks a shift from the Fed’s earlier stance. As recently as June, most officials projected keeping rates steady through much of 2025 before considering gradual reductions. But softer data over the summer, including slower hiring and easing wage growth, prompted a reassessment of the balance between curbing inflation and sustaining employment.
The move also came despite mounting political pressure. President Donald Trump had repeatedly called on the Fed to cut rates more aggressively to spur growth, but Powell stressed the central bank’s decisions are guided by economic data, not political considerations.
Fresh quarterly projections released Wednesday showed policymakers now expect two more rate cuts this year, with the median forecast putting rates around 3.50%–3.75% by December.
Powell said the path of policy will remain data-dependent, stressing that further easing will hinge on continued progress toward the Fed’s 2% inflation target and the evolution of labor market conditions.
Markets are betting on another quarter-point cut at the October meeting and a further move in December.
