US Fed announces first rate cut in nine months amid slower job growth and economic uncertainty
&imwidth=600&imheight=450&format=webp&quality=medium "US Fed announces first rate cut in nine months amid slower job growth and economic uncertainty")
US Fed announces first rate cut in nine months Photograph: (AFP)
The Fed cut interest rates by 25 basis points, citing slower job growth and employment risks. New Governor Stephen Miran dissented, pushing for a larger cut
The US Federal Reserve decided to reduce interest rates for the first time in 2025 on Wednesday (September 17), responding to signs of a cooling job market and potential risks to employment. The rate cut, set at 25 basis points, brings the benchmark lending rate to a range between 4.0% and 4.25%, with the central bank signaling two additional cuts before the end of the year.
The vote was split, with the only dissent coming from newly appointed Fed Governor Stephen Miran. Miran, who previously served as an economic adviser to President Donald Trump, pushed for a larger reduction of 50 basis points. The other members of the Federal Open Market Committee (FOMC) voted in favor of the smaller cut. This meeting marked Miran’s first decision as a voting member, following his swift Senate confirmation earlier in the week. His appointment was notable, as he was named to replace another official who retired early, with many observers highlighting the political implications of his role.
The Fed's decision reflects the difficult balancing act policymakers face: supporting the labor market while managing inflation risks. Although inflation remains above the central bank's 2% target, the economic indicators point to a deceleration in job growth, prompting the Fed to prioritize employment concerns.
In its statement, the Fed acknowledged that risks to the labor market had increased, noting a slowdown in job creation and a slight uptick in the unemployment rate, though it still remains low. Despite inflationary pressures, the central bank emphasized the importance of boosting the economy and providing more support for the workforce.
Additionally, the Fed raised its 2025 economic growth projection from 1.4% to 1.6%, but made no revisions to its inflation or unemployment forecasts. The move comes amid continuing political pressure, particularly from President Trump, who has consistently urged the Fed to cut rates further to stimulate the economy. The political influence on the Fed has drawn criticism, especially with Miran’s proximity to the Trump administration. Miran’s appointment, along with the ongoing legal dispute surrounding the ousting of Fed Governor Lisa Cook, has raised concerns among some economists about the Fed’s independence.
EY’s chief economist, Gregory Daco, warned that the growing political attention on the Fed could have negative consequences. Historical precedents suggest that central banks under political influence can lead to suboptimal economic outcomes, including higher inflation, slower growth, and greater market volatility. Looking ahead, the Fed’s upcoming decisions will likely be closely scrutinized, as will Miran’s future votes and statements. The central bank faces an increasingly complex economic environment, with the full effects of Trump’s tariffs still unfolding.
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