The U.S. Federal Reserve on Wednesday reduced its benchmark federal funds interest rate by 25 basis points, setting the new target range at 4.00 to 4.25 percent.
This marks the first rate cut since December 2024 and reflects the Fed’s cautious approach to moderating economic challenges.
According to the Federal Open Market Committee (FOMC), economic growth slowed during the first half of 2025. Job creation has eased, the unemployment rate has ticked upward, and inflation remains slightly higher than the Fed’s preferred 2 percent target. The FOMC emphasized that lowering the interest rate aims to support employment and bring inflation under control without stalling growth.
The Committee’s statement highlighted that further adjustments will depend on upcoming data, shifting economic outlooks, and risk assessments. While 11 members voted in favor of the quarter-point reduction, newly confirmed Governor Stephen Miran dissented, pushing instead for a deeper 50 basis point cut.
Miran’s arrival on the Fed Board followed a politically charged week in Washington. Just before the meeting began, a federal appeals court rejected former President Donald Trump’s attempt to unseat Governor Lisa Cook. Meanwhile, the U.S. Senate narrowly approved Miran’s nomination, filling the vacancy left by Adriana Kugler’s resignation in August.
Alongside its policy decision, the Fed released updated forecasts. U.S. GDP growth is projected at 1.6 percent for 2025, gradually improving to 1.9 percent by 2027. Unemployment is expected to remain steady at around 4.5 percent before easing slightly in subsequent years.
The move signals the Fed’s delicate balancing act—easing borrowing costs to stimulate growth while maintaining vigilance against persistent inflationary pressures.