Federal Reserve Announces Rate Cut, Forecasts Two More in 2025
The Federal Reserve has announced its first interest rate cut of 2025, lowering the benchmark rate by 0.25 percentage points to a range of 4.00% to 4.25%. This move signals the possibility of additional cuts in the near future.
According to the Fed’s updated “dot plot” projections, two more quarter-point cuts are likely to occur before the end of the year. This would result in rates dropping to between 3.50% and 3.75%. This is a significant change from the Fed’s June forecast, which predicted only two total cuts for 2025.
Following the announcement, markets responded positively, with major indexes reaching record highs. The S&P 500 closed at 6,631.96, the Nasdaq at 22,470.73, and the Russell 2000 small-cap index achieved its first record high since 2021.
Fed Chair Jerome Powell expressed concerns about the labor market, stating there has been a “marked slowing in both the supply of and demand for workers.” The unemployment rate has increased to 4.3%, and recent data indicates that the economy created nearly a million fewer jobs than initially reported over the past year.
The rate cut signifies a shift in focus towards supporting economic growth. Powell described the monetary policy as moving towards a “more neutral” position, as opposed to being restrictive.
Source: CNBC