FED APPROVES INTEREST RATE CUT AND SEES TWO MORE COMING

The Federal Reserve on September 17, 2025, approved a quarter-point interest rate cut, lowering the benchmark overnight lending rate to a range of 4.00%-4.25%.

The Federal Open Market Committee (FOMC) voted 11-to-1 in favor of the decision, with newly appointed Governor Stephen Miran dissenting, advocating for a half-point cut. Governors Michelle Bowman and Christopher Waller, both appointed by President Donald Trump, supported the 25-basis point reduction.The FOMC’s post-meeting statement noted that economic activity has “moderated,” with job gains slowing and inflation remaining “somewhat elevated.”

The committee highlighted increased downside risks to employment, alongside uncertainty in the economic outlook, while emphasizing its commitment to its dual mandate of stable prices and full employment.Market reactions were mixed.
The Dow Jones Industrial Average rose over 300 points, while the S&P 500 and Nasdaq Composite recorded losses. Treasury yields saw modest declines.The FOMC’s “dot plot” projected two additional rate cuts before the end of 2025, with 10 of the 19 participants anticipating cuts at the October and December meetings.

Nine participants expected only one more cut, while one official opposed any further reductions. One dot, possibly Miran’s, indicated a total of 1.25 percentage points in additional cuts this year. The plot also projected one cut in 2026, slower than market expectations of three, and another in 2027, approaching a long-run neutral rate of 3%.Economic projections from the meeting showed slightly faster growth than forecasted in June, with unemployment and inflation outlooks unchanged.

The decision followed significant political attention, including President Trump’s calls for aggressive rate cuts to support the housing market and reduce government debt financing costs. Trump’s appointment of Miran, who has criticized Fed Chair Jerome Powell, and a court’s decision to block Trump’s attempt to remove Governor Lisa Cook, appointed by former President Joe Biden, added political context.

Cook voted with the majority for the cut.Recent economic data showed solid growth and consumer spending exceeding forecasts. However, the labor market raised concerns, with the unemployment rate at 4.3% in August, the highest since October 2021. Job creation has been stagnant, and a Bureau of Labor Statistics update revealed nearly a million fewer jobs created than initially reported in the 12 months prior to March 2025.