WASHINGTON (Realist English). The Federal Reserve lowered its benchmark interest rate by a quarter percentage point on Wednesday and indicated two additional cuts are likely before year-end, as policymakers balanced rising concerns about the labor market against stubbornly elevated inflation.
The Federal Open Market Committee voted 11–1 to reduce the federal funds rate to a target range of 4.00%–4.25%. Newly appointed Governor Stephen Miran cast the lone dissent, pressing for a deeper half-point cut.
The Fed’s statement noted that “job gains have slowed” while inflation “remains somewhat elevated.” Chair Jerome Powell, in a press conference, said the decision reflected “risk management” rather than a response to a collapsing economy. “The downside risks to employment appear to have risen,” Powell cautioned, framing the cut as moving policy into a “more neutral” stance.
Markets reacted with volatility. Treasury yields fell on short-term notes but rose on longer maturities, while equity indices swung between gains and losses.
The Fed’s updated “dot plot” showed most policymakers expecting two more cuts in 2025, with divisions over timing. Nine participants saw one cut, 10 foresaw two, and one opposed any reduction. Longer-term projections pointed to a gradual move toward a neutral rate of about 3% by 2027.
Goldman Sachs strategist Simon Dangoor said the decision placed “doves in the driver’s seat,” adding that only a sharp rebound in inflation or hiring would derail the easing path.
The move came against a backdrop of political tension. President Donald Trump has pressed the Fed to deliver faster, deeper cuts to support housing and ease debt costs. Miran, his appointee, has echoed those calls, fueling questions over the central bank’s independence. Powell rejected the notion of broader support for a half-point cut.
Complicating matters, a court this week blocked Trump’s attempt to remove Governor Lisa Cook, an appointee under former President Joe Biden, amid unproven fraud allegations. Cook joined the majority in supporting the quarter-point move.
Economic data remain mixed: growth and consumer spending have held up, but unemployment rose to 4.3% in August, the highest since 2021, and a major revision showed nearly one million fewer jobs created than previously reported over the past year.
Powell’s term runs until May 2026, but speculation over his successor — with Governor Christopher Waller seen as a contender — has intensified as the Fed navigates a fragile economy and growing political scrutiny.