Federal Reserve Announces First Rate Cut of 2025 Amidst Labor Market Uncertainties
The Federal Reserve has announced a cut in its benchmark interest rate by 0.25 percentage points on Wednesday, marking the first reduction in 2025. This adjustment brings the federal funds rate to a range of 4% to 4.25%. The decision comes in light of growing concerns about a weakening labor market, despite persistent inflation pressures.
The 11-to-1 vote demonstrated less dissent than anticipated. Newly appointed Governor Stephen Miran, President Trump’s appointee, cast the sole opposing vote in favor of a larger half-point cut. This move indicates the Fed’s shift in focus, prioritizing employment concerns over inflation risks.
“The labor market is really cooling off,”
…said Fed Chair Jerome Powell at a news conference. Recent data reveals the U.S. added a mere 22,000 jobs in August, falling significantly short of expectations. Meanwhile, the unemployment rate rose to 4.3% – the highest since September 2017, excluding the pandemic period.
The Fed’s “dot plot” projections suggest two more quarter-point cuts are expected before the end of the year, which would bring rates to 3.5%-3.75%. However, officials remain divided on the pace of future reductions. Seven out of the twelve committee members believe rates should remain unchanged for the remainder of 2025.
This decision arrives amidst unprecedented political pressure from President Trump, who has been advocating for more aggressive rate cuts and attempted to reshape Fed leadership.
Source: www.cnbc.com