Fed Cuts Rates Amid Tumultuous Meeting and Political Pressure

Federal Reserve reduces benchmark rate by 25 basis points to 4.00%-4.25% as job growth weakens and tariffs fuel inflation; meeting marked by dissents and political interference.

WASHINGTON, Sept. 17, 2025 - The Federal Reserve on Wednesday initiated its first interest rate cut of the year, lowering the federal funds rate by 25 basis points to a target range of 4.00%-4.25%, in response to a cooling labor market and persistent tariff-driven price pressures.

Nut Graf The decision marks a pivotal shift from the Fed’s restrictive stance, balancing its dual mandate amid slowing hiring and rising costs. The outcome reflects growing concerns over employment risks and follows intense White House efforts to influence policy.

Key Details and Market Reaction

  • Rate Cut Confirmed Policymakers voted to reduce rates by a quarter point, the first cut since December 2024, with dissenting votes from members arguing either for a larger reduction or no cut at all.
  • Dot Plot and Economic Projections The updated Summary of Economic Projections projected one additional rate cut by year-end, down from two cuts signaled in June, underscoring unease over inflation’s trajectory.
  • Political Intrusion The meeting featured newly sworn-in governor Stephen Miran and embattled governor Lisa Cook, whose participation followed a federal appeals court ruling against her removal-an unprecedented legal battle over Fed independence.
  • Market Response U.S. stocks rallied broadly after the announcement, with the S&P 500 and Nasdaq leading gains, as investors welcomed the shift toward easier monetary policy. Treasury yields slipped but held near recent lows ahead of Fed Chair Jerome Powell’s press conference.

Background and Outlook

The Fed’s move comes after data showing August job gains slowed to roughly 22,000 positions, while unemployment filings reached four-year highs. Inflation has hovered above the Fed’s 2% goal, partly due to tariffs, complicating the timing and scale of policy easing.

Fed Chair Jerome Powell is set to discuss the rationale and future path of rates at his 2:30 p.m. press briefing. Attention will focus on language signaling how the Fed weighs labor-market risks against inflationary pressures amid ongoing political scrutiny.

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