Fed delivers 25 basis-point rate cut

September 17, 2025 (MLN): The Federal Reserve reduced its benchmark interest rate by a quarter percentage or 25 basis point to a target range of 4.00% to 4.25% and indicated that two additional cuts are likely before the end of the year, citing rising risks in the U.S. labor market.

In an 11-to-1 vote, the Federal Open Market Committee (FOMC) approved the widely expected move, with Governor Stephen Miran casting the lone dissent in favor of a deeper half-point reduction. Governors Michelle Bowman and Christopher Waller, both seen as potential holdouts, ultimately supported the quarter-point cut, according to CNBC.

The committee’s statement described economic activity as having “moderated,” while noting that “job gains have slowed” and inflation “remains somewhat elevated.” Policymakers acknowledged heightened uncertainty in the outlook, warning that risks to employment have increased.

The Fed’s updated “dot plot” of individual rate projections showed a split nine officials anticipate just one more cut this year, while 10 expect two, pointing to further easing at the October and December meetings. One participant opposed any cuts, including Wednesday’s, while Miran has pushed for as much as 1.25 percentage points of reductions this year.

Looking further ahead, the Fed projected only one cut in 2026 and another in 2027, moving gradually toward its long-run neutral rate of 3%. Growth forecasts ticked up slightly compared with June projections, though expectations for unemployment and inflation remained unchanged.

The decision comes against a backdrop of political drama. Trump has pressed the central bank for faster and larger cuts, while Miran his appointee  has openly criticized Chair Jerome Powell. 

Meanwhile, a court this week blocked Trump from removing Governor Lisa Cook, a Biden-era appointee accused by the White House of mortgage fraud, though no charges have been filed. Cook sided with the majority in backing the quarter-point move.

Despite strong consumer spending and solid growth, the labor market has softened. 

The unemployment rate rose to 4.3% in August, its highest since October 2021, while revised government data showed nearly one million fewer jobs created over the past year than previously reported, CNBC reported

Waller, who supported the latest cut, has argued for easing policy now to safeguard against further labor market deterioration.

His name has been floated as a possible successor to Powell when his term ends in May 2026.

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