Finally, on September 17, 2025, the U.S. Federal Reserve cut its federal funds rate by 25 basis points, marking its first reduction of the year, and brought the target range to 4.00%-4.25%. The move signals a shift toward a more cautious policy stance as officials weigh the impact of slowing labor markets against inflationary pressures.

The policy change was framed as a “risk-management” step by Fed Chair Jerome Powell, acknowledging weakening job growth, a modest rise in unemployment, and sustained inflation. The Committee highlighted that downside risks to employment have increased and said it will monitor incoming data closely before further adjustments.

Among the 19 Fed officials, only one dissented: new Governor Stephen Miran, who pushed for a steeper half-point cut. His appointment – controversial due to his dual role as a White House economic adviser – has sparked debate over central bank independence. Powell, however, affirmed that decisions will depend on economic evidence, not politics.

Markets reacted with mixed enthusiasm, interpreting the cut as necessary but modest. Many participants expect the Fed to deliver one or two additional quarter-point cuts before the end of the year, contingent on the data.

Critics caution, however, that easing too fast could reignite inflation, especially amid rising tariff pressures and supply-chain constraints. Some market watchers view this rate cut as signaling that the balance of risks has shifted, from inflation dominance to growing recessionary concerns.

In short, the Fed is walking a tightrope: trying to reinvigorate growth without destabilizing prices. With uncertainty high, it has left the door open to further cuts, pending fresh data and evolving economic conditions.

End Notes

Source: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250917a.htm?utm_source=chatgpt.com