The US Federal Reserve has cut interest rates for the first time in 2025, citing rising risks to the job market. The move, announced on Wednesday, reduces the benchmark lending rate by 25 basis points to a range of 4% to 4.25%.
Fed Chair Jerome Powell said the decision reflects concerns over slower hiring and signs of weakening employment. He stressed that the central bank remains independent from political influence, despite growing pressure from President Donald Trump for larger cuts.
The vote within the Federal Open Market Committee showed broad support. Eleven members backed the quarter-point cut, while only Governor Stephen Miran opposed, calling instead for a deeper 50-point reduction.
Economists noted the Fed’s cautious approach. Ryan Chahrour of Cornell University said the vote highlighted unity among policymakers who want to avoid sending mixed signals to markets.
Still, a split remains over future action. Updated projections show that seven officials see no further cuts this year, while a narrow majority expects two more. Michael Pearce of Oxford Economics called the divide unusual, suggesting that October’s decision may depend heavily on upcoming job data.
At a press briefing, Powell explained that projections should be read as probabilities, not certainties. He said the Fed is balancing inflation pressures with the risk of higher unemployment. While inflation remains elevated, the central bank noted that job gains have slowed and unemployment has edged up.
Some analysts argue that the risk of job losses outweighs concerns about prices. Heather Long, chief economist at Navy Federal Credit Union, warned that failing to act could trigger a downward economic spiral and even recession.
The Fed also slightly raised its 2025 growth forecast to 1.6%, up from 1.4% in June, while leaving unemployment and inflation forecasts unchanged.
The US Fed rate cut 2025 has drawn global attention as markets assess its impact on borrowing costs, trade, and economic stability. With political pressure rising and the labor market showing signs of strain, policymakers face a challenging balance in the months ahead.
