Fed Rate Cut – September 2025

What Happened?

• The US Federal Reserve reduced its benchmark interest rate by 0.25 percentage points, setting it in the range of 4.00% to 4.25%.

• This is the first rate cut by the Fed since December 2024.

• The decision reflects concern over rising unemployment and slower job growth, even as inflation remains above the Fed’s 2% goal.

• The majority of Fed officials expect two more rate cuts before the end of 2025.

Why Did the Fed Cut Rates?

• Recent data showed hiring is slowing, and economic growth has lost momentum in 2025.

• Inflation remains high, but the risks of higher unemployment are becoming a bigger worry for the central bank.

• Fed officials want to support jobs and prevent the economy from tipping into a recession.

Additional Details

• The only dissenting Fed governor, Stephen Miran, wanted a bigger 0.5 percentage point cut.

• President Trump has been pressuring the Fed for deeper and faster rate cuts to spark more growth.

• The Fed signaled that its next moves will depend on how economic data unfolds, especially jobs and inflation trends.

• Stock markets were mixed after the announcement, while the US dollar saw a slight move higher.

What Does It Mean for You?

• Borrowing costs, such as those for home, car, or business loans, could become a little cheaper.

• If future rate cuts follow, loans may get even more affordable later in the year.

Economic Outlook

• The Fed now forecasts US inflation finishing 2025 at 3% and unemployment at around 4.5%.

• Additional rate cuts are likely at the next policy meetings in October and December.

• The central bank remains focused on balancing its targets for low inflation and maximum employment.