Source: The indu
Washington, September 17, 2025. The U.S. Federal Reserve has lowered its benchmark interest rate by 0.25 percentage points on Wednesday, the first rate cut from the Fed since last December, and a sign it is growing more worried about a softening job market.
The rate is currently approximately 4.1%, lower than 4.3%. Fed Chair Jerome Powell mentioned that officials expect to cut rates two additional times this year and then another time in 2026. Investors had expected cuts to be deeper and faster than those projected.
Attention Turns to Jobs
Up until this point, the Fed had held rates steady and studied the implications of tariffs, tighter immigration restrictions, and related governmental stances on the economy. However, studies show that the focus has shifted from inflation to jobs.
Hiring has almost come to a stop in recent months, and the unemployment rate has inched higher. Powell explained, “In this less dynamic and somewhat softer labour market, the downside risks to employment appear to have risen.”
Lower interest rates are designed to decrease borrowing costs for home loans, car loans, and business loans, which could support growth and encourage companies to hire more.
A Split Committee
The vote was not unanimous. Stephen Miran, a newly appointed Fed member by President Donald Trump just days before the meeting, voted against the proposal. He would have preferred a greater cut. Powell said there wasn’t a lot of support for that option with other policymakers.
The meeting also demonstrated Powell’s attempt to maintain cohesion in the committee, which now includes Trump appointees as well as Gov. Lisa Cook, whom the president has tried unsuccessfully to oust from office.
Political Pressure
Trump has often criticised Powell and the Fed for not cutting rates faster. This week, he said officials should on Tuesday “have to make their own choice” but added that “they should listen to smart people like me.” Mr. Trump has said the Federal Reserve should reduce rates by three full percentage points.
Judges have prevented Trump from dismissing Lisa Cook, finding that it would infringe her legal rights. The case is considered a unique challenge to the Fed’s independence.
Inflation Still Elevated
The Fed faces the challenge of price increases as well. Inflation came in at 2.9% in August, up from 2.7% in July, and remains above the Fed’s 2% target. Normally, weak hiring conditions help to lower inflation. However, tariffs and cost increases have kept prices up.
Worldwide Overview
Other central banks are pursuing a counter trajectory. The European Central Bank did not raise its interest rate last week, as inflation there has declined. The Bank of England is expected to maintain the same direction on Friday, as U.K. inflation currently stands at 3.8%.
Next Steps: The action by the Fed represents a deliberate pivot in U.S. monetary policy: officials want to support jobs but not allow inflation to get any higher. We will have a better sense of how many more cuts the Fed is willing to deliver over the next few months of jobs and prices data.
