Federal Reserve Cuts Rates, Signals More in 2025/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Federal Reserve lowered its benchmark interest rate by a quarter-point to 4.1%, its first cut since December. Officials signaled two more reductions this year, shifting focus from inflation to a weakening job market. Chair Jerome Powell called the move a “recalibration” to stabilize growth.
Federal Reserve Rate Cut Quick Looks
- Fed cuts interest rate by 0.25% to 4.1%.
- First rate cut in nine months.
- Fed signals two more cuts this year, one in 2026.
- Chair Jerome Powell says risks to jobs outweigh inflation concerns.
- Inflation still above 2% target at 2.9% in August.
- Labor market weakening: job losses in June, minimal gains in August.
- Employment estimates revised down by 911,000 jobs.
- Only one dissent: Stephen Miran, Trump-appointed Fed governor.
- Wall Street expected up to five cuts this year and next.
- Trump administration tariffs and immigration policies weighing on growth.
- Economists call decision a “recalibration,” not a crisis move.
- Rate cut may ease mortgages, auto loans, and business borrowing.
Deep Look
Fed Shifts Focus From Inflation to Jobs With Rate Cut
WASHINGTON — The Federal Reserve cut its benchmark interest rate on Wednesday, lowering borrowing costs for the first time in nine months and signaling two additional cuts before year’s end. The decision reflects the central bank’s growing concern over a rapidly cooling labor market.
The quarter-point cut, which reduces the short-term federal funds rate to about 4.1% from 4.3%, marks the Fed’s first rate move since December. Fed Chair Jerome Powell said the decision was intended to “recalibrate” policy in response to weakening employment data, even as inflation remains slightly above the bank’s 2% target.
“Downside risks to employment have risen,” the Fed said in its post-meeting statement.
The decision followed a two-day policy meeting in Washington, where officials weighed how to balance persistent inflation with mounting evidence that the once-resilient job market is faltering.
Jobs Now Top Concern
For most of the past year, the Fed kept rates unchanged, concerned that President Donald Trump’s tariffs and stricter immigration policies could push consumer prices higher. But recent reports show employers pulling back on hiring:
- In June, payrolls fell by 13,000 jobs.
- In August, just 22,000 jobs were added nationwide.
- Government revisions indicated the U.S. gained 911,000 fewer jobs in the 12 months ending March 2025 than previously reported.
The sharp downgrade shook confidence in the economy’s momentum.
“This is a huge wake-up call,” said Talley Leger, chief market strategist at Wealth Consulting Group. “If losing nearly a million jobs doesn’t light a fire under the Fed, I don’t know what will.”
Inflation Still a Challenge
Even as unemployment pressures build, inflation remains sticky. Consumer prices were 2.9% higher in August compared with a year earlier, up from 2.7% in July. Economists attribute the stubborn inflation partly to tariffs raising costs on imported goods like furniture, appliances, and food.
This complicates the Fed’s balancing act. Aggressive cuts could boost growth but also reignite inflation, while moving too slowly risks a deeper jobs slump.
Wall Street’s Expectations vs. Fed’s Outlook
Markets had priced in up to five rate cuts between late 2025 and mid-2026, according to CME FedWatch futures. Instead, the Fed’s official projections suggest:
- Two additional cuts in 2025.
- One cut in 2026.
The more cautious pace disappointed some traders, though stocks mostly held steady on the news.
“We’re not at a break-glass moment,” said Vincent Reinhart, chief economist at BNY Investments. “This is a recalibration, not a panic response.”
Political Pressure and Dissent
The vote to cut rates was nearly unanimous, with only one dissent: Stephen Miran, a Trump appointee confirmed just days earlier. Analysts had expected more resistance from Trump-aligned members of the Fed, but Powell appears to have forged consensus.
The Fed’s moves come against a tense political backdrop. Trump has criticized previous Fed chairs for being too cautious, while his administration’s policies — tariffs, labor enforcement, and budget shifts — have complicated the economic outlook.
Impact on Consumers and Businesses
Lower rates are likely to ease costs across the economy:
- Mortgage rates could dip, offering relief to homebuyers.
- Car loans and credit cards may become cheaper.
- Small business borrowing could pick up as financing becomes more affordable.
Still, analysts warn the benefits may take months to filter through.
Looking Ahead
The Fed also released updated economic projections Wednesday. Most policymakers anticipate modest growth and gradual job recovery if cuts continue. But Powell emphasized flexibility, leaving the door open to faster reductions if conditions worsen.
For now, the message is clear: the Fed is pivoting from inflation-fighting mode to defending jobs.
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