Two more are expected to occur before the year ends
The Federal Reserve has issued a rate cut, lowering its benchmark overnight lending rate by a quarter percentage point, according to CNBC.
This marked the first time the Federal Reserve had cut interest rates in 2025. Within the Federal Open Market Committee, only Governor Stephen Miran voted against the move as he opted for a cutting the rates by a half-point instead.
Following the meeting, the committee released a statement that the decision behind the rate cuts were influenced by the moderation of the country’s economic activity. It also pointed out that job gains have slowed and that inflation has increased and continued to stay at a high level.
“The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the committee said in their statement.
As the decision puts the overnight funds rate between 4% to 4.25%, the Federal Reserve has also pointed towards the possibility of two more rate cuts are set to be issued before the end of the year. According to the “dot plot” of individual expectations of officials, the dots seemed to show that the policymakers were leaning toward two more cuts. However, there were still a wide level of disparity among the committee.
Chair Jerome Powell stated that the rate cut was a form of risk management instead of something that directly supporting a weakened economy. Powell also shared his concerns regarding the labour market as the supply and demand for workers slowed, stating that it was “unusual in this less dynamic and somewhat softer labor market.”
“The downside risks to employment appear to have risen,” he added.
In August, the unemployment rate reached 4.3%. Meanwhile, data from the Bureau of Labor Statistics showed that there were a million fewer jobs created compared to the numbers reported during the 12-month period before March 2025.
The Dollar Index saw a drop following the rate cuts, reaching 96.30 for the first time since February 2022, according to FXStreet.com.
