On September 17, 2025, the US Federal Reserve lowered its benchmark interest rate by 25 basis points, moving the federal funds target range down to 4.00%–4.25%. This marks the first rate cut in nearly nine months, ending a prolonged period of holding rates steady.
The decision came as signals emerged of labour market weakness: hiring has slowed, job‐growth has cooled, and unemployment has begun to rise. At the same time, inflation remains above target — still elevated though a bit more contained. Fed Chair Jerome Powell described the cut as a “risk-management” move, reflecting concern about the possibility of economic deterioration rather than an aggressive shift toward easing.
Outlook: More Cuts Expected, Mixed Market Response
While the quarter‐point cut was broadly expected by markets, the Fed signalled that two more rate reductions might follow before the end of the year. This path of gradual easing aims to balance slowing growth with persistent inflation pressures.
The vote was not unanimous: newly appointed Governor Stephen Miran dissented, arguing for a more forceful half-percentage-point cut instead. Some analysts see his dissent as evidence of growing pressure on the Fed to adopt a more dovish stance, especially from political quarters.
Markets reacted to the announcement with mixed signals—Treasury yields fluctuated, the dollar saw short‐term gains, and there’s uncertainty over how much easing will actually help if inflation remains sticky. Analysts caution that although the cut may relieve some immediate strain, risks of recession or stagflation are being scrutinised more closely.
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