The Federal Reserve lowered its benchmark rate by a quarter point to 4%–4.25%, the first cut this year after five straight pauses. Officials signaled two more reductions are likely before year-end as weakness in the labor market becomes harder to ignore.
Chair Jerome Powell told reporters that hiring has slowed to below the pace needed to keep unemployment steady. “I can no longer say the labor market is very solid,” he admitted. August jobless figures hit 4.3%, the highest in nearly four years.
Inside the Decision
The Fed’s rate-setting committee voted 11–1, with new Governor Stephen Miran dissenting in favor of a deeper half-point cut. Miran, on temporary leave from the White House Council of Economic Advisers, joined Governor Lisa Cook at the meeting.
Policymakers framed the move as a “risk-management cut.” Powell said the Fed is proceeding cautiously and will decide “meeting by meeting.”
Inflation Still a Worry
Even as job concerns rise, inflation hasn’t disappeared. Tariff-driven price increases pushed the Fed’s preferred gauge up 2.6% in the year through July, with August expected to climb again. Powell stressed the Fed must prevent a “one-time” price shock from becoming an ongoing problem.
Politics in the Background
The cut comes amid heavy pressure from President Donald Trump, who has demanded bigger reductions and is in a legal fight to install his top economic adviser on the Fed board.
Markets & Forecasts
Backdrop
Powell had already hinted at possible easing in his Jackson Hole speech last month, citing shifting risks. Since then, slowing job growth and tariff-fueled inflation have pulled the Fed in two directions—forcing Wednesday’s recalibration.
Source: Fed Cuts Rates, Powell Admits Jobs Market Is Cracking