The U.S. Federal Reserve (FED) announced on September 17, 2025, its first interest rate cut of the year, lowering the federal funds rate by 0.25 percentage points to a new target range of 4.00% to 4.25%, down from the previous 4.25% to 4.50%. This decision, made after the Federal Open Market Committee (FOMC) meeting and led by Chair Jerome Powell, marks a shift in monetary policy after months of keeping rates steady to fight inflation. According to Powell, the move seeks to get ahead of signs of economic cooling and protect employment amid global uncertainty.
In its statement, the FED highlighted that the labor market has begun showing signs of weakness: job creation has slowed and unemployment has slightly increased, raising concerns about a possible sharper downturn in the coming months. Although inflation remains above the 2% target, policymakers stated that the risk of a deterioration in employment justifies a preventive action. The decision was not unanimous: new board member Stephen Miran voted in favor of a more aggressive 0.50-point cut, arguing that economic growth and domestic consumption are showing signs of fatigue.
However, the majority of the committee opted for a more cautious approach, stressing that future moves will depend on incoming economic data. Financial markets reacted with initial volatility but later rallied, as investors expect the FED could implement up to two additional cuts during the remainder of the year if conditions allow it. This move by the FED aims to provide relief to indebted households and businesses while supporting growth without losing sight of the goal of price stability.
