Fed Cuts Interest Rate to 4.00%-4.25%, Signals Further Easing

Lead The Federal Reserve lowered its target range for the federal funds rate by 25 basis points to 4.00%-4.25% in Washington on Wednesday, citing slowing job gains and elevated inflation.

Nut Graf Facing signs of a cooling labor market and persistent price pressures, the Fed’s Open Market Committee moved to ease borrowing costs and pledged careful monitoring of incoming data to guide future rate adjustments.

Policy Decision

• The Fed reduced its federal funds rate target range by ¼ percentage point, effective September 18.
• Governors voted 10-1 in favor; Governor Stephen Miran dissented, preferring a ½-point cut.
• The Board of Governors approved a ¼-point reduction in the primary credit rate to 4.25%.

Economic Outlook

• Job growth has moderated and unemployment ticked higher, though remaining near historic lows.
• Inflation has risen recently and remains above the Fed’s 2% objective.
• Committee members judged that downside risks to employment have increased amid slowing activity.

Balance Sheet and Operations

• The Fed will continue gradual runoff of Treasury and agency securities.
• Standing overnight repurchase agreements will be offered at a 4.25% bid rate, with a $500 billion operation limit.
• Reverse repurchase agreements will carry a 4.00% offering rate, capped at $160 billion per counterparty per day.

Forward Guidance Officials signaled two additional quarter-point cuts could occur before year-end if economic indicators warrant further easing. The Committee will weigh labor market developments, inflation trends, and global financial conditions in setting policy.

Market Reaction Stocks opened mixed, with the Dow rising and the S&P 500 slipping. Treasury yields fell modestly, reflecting market expectations of continued rate cuts.