On Wednesday, the Federal Reserve lowered its benchmark interest rate by 25 basis points, the first time in six months. Federal open market committee (FOMC) voted to reduce the target range to 4.00% to 4.25 a move well anticipated by financial markets.
It is a move that is indicative of worrying trends in the declining conditions of the labour market, despite inflation standing above the 2 percent threshold of the central bank. According to Fed officials, the growth in the number of jobs is declining, and the unemployment rate has crept up, although at a comparatively low level in historical terms.
Powell identifies Major Threats at Press Conference.
Fed Chair Jerome Powell talked to reporters in Washington after the policy decision. He observed that the labour market continues to be robust yet it has become stagnant over the past months. Another risk that Powell identified is the negative risks to the employment, though she noted that inflation has been rising in the last four months.
Fed Chair Jerome Powell addresses reporters following the September 2025 rate cut decision.
He made it known that the move to cut was motivated by the necessity to save the job market. Powell further noted that authorities will be determined to achieve full employment as inflation is brought back to the 2 percent mark. He emphasized that the Fed is not on a pre-determined course and the decisions to make in future will be based on the information coming.
Disagreement Within the Federal Reserve Board
It passed with almost a unanimous vote and only one vote against it. The incoming Fed governor, Stephen Miran, who was nominated by President Donald Trump as the possible successor to Powell, preferred an even stronger 50 basis point reduction.
New Fed governor Stephen Miran voted for a larger 50 basis point cut
Miran, a White House economic advisor, claimed that more should have been done considering a slackening growth. Nonetheless, Powell did not uphold the idea that there was widespread backing on a bigger cut. He restated that there did not exist any mass support of 50 basis point cut this day.
The Kobeissi Letter, a highly regarded market newsletter, posted on its social media platforms that the schism in the Fed is increasing. It announced on X (that was Twitter) that it will make two more cuts in 2025 and only six officials will not make any cuts.
SUMMARY OF FED DECISION (9/17/2025):
1. Fed cuts rates by 25 bps in first rate cut of 2025
2. Median projection shows 50 bps in additional rate cuts for 2025
3. Governor Miran dissents in favor of 50 bps cut today
4. Fed says downside risks to employment have risen
5. 6 Fed…
— The Kobeissi Letter (@KobeissiLetter) September 17, 2025
Fed Faces Pressure Over Independence
When Miran was appointed, it has raised concerns that the Fed is independent of the executive branch. The opposition of Miran was a contribution to the political pressure on Powell, who has been criticized by the White House on taking too long to reduce rates.
Powell replied straight to the concern remarks saying, “We are firmly determined to keep our independence. He was also not going to comment on any legal issues that were facing Governor Lisa Cook whom Trump had tried to oust earlier this year.
Economic Growth Slows in First Half of 2025
Recent economic statistics impacted the policy-making decision of the Fed. The growth in gross domestic product has been declining to 1.5 percent in the first half of 2025, compared to 2.5 percent in the previous year 2024. Powell blamed to a considerable extent the slowing down on the weakening consumer spending, which has been a driving force of US growth in recent years.
The housing industry is also not fast. Powell observed that the increase in the cost of borrowing is still a burden on the demand and that small moves in the rates might not have a great effect in changing the picture. He tacked on the opinions of analysts that a significant shift in rates would be required to bring about a housing recovery.
Inflation Remains Above Target
The Fed has to deal with inflation. The fourth consecutive month-on-month growth was 2.9% in price in August. The last time inflation was below the 2% target was in February 2021, and it highlights how price stability is challenging to attain and enable growth at the same time.
US inflation rose to 2.9% in August, marking four consecutive monthly increases
Powell recognized that tariffs that have just been introduced by the Trump administration have already started to increase some prices. He provided, though, that the overall impacts on economic activity and inflation were yet to be experienced. In addition, the supply constraints (such as the labour shortages caused by the decreased immigration) are still observed by the Fed.
Futures Markets Expect Another Cut in October
There is further expectations of easing in financial markets in the coming months. CME futures markets indicate that there are high chances of the Fed cutting the rates by another 25 basis points at its October 29 meeting at 87.7 percent.
Economists consider the ruling to depend on the future labour market statistics. According to Michael Pearce, the deputy chief US economist at Oxford Economics, it will be again a question of how the incoming data on the labour market breaks.
According to the press release of the updated dot plot by the Fed along with the policy statement, it can be seen that the median forecast for the two additional cuts of the year 2025 is present. This is an improvement to the June forecast as there is an increase in the concern regarding employment.
Crypto Market Reaction Remains Limited
The markets in digital assets responded marginally with the announcement of the Fed since traders had already anticipated the cut in the rate. Bitcoin spike temporarily to around $118,000 within the Asian trading sessions in the Thursdays and fell to 117,500.
Ethernet was showing a better showing, up about 3 per cent, to rise over $4,600. Representatives of the altcoins, such as Solana, Dogecoin, Cardano, Hyperliquid and Avalanche, gained modestly upon the decision of the Fed as well. Analysts observed that the cryptocurrency markets are still susceptible to liquidity situation and did not consider the action by the Fed as a significant shock.
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Outlook for Monetary Policy in 2025
The Fed has a complicated balancing juggle to go through until the end of the year. The authorities need to balance the dangers of the labour market slowing down with the continued high inflation.
Powell emphasized that the committee will keep on evaluating the employment and inflation figures before making a decision on their future actions. He emphasized the point that the first cut of 2025 was reasonable but it does not warrant additional cuts.
The performance of the October meeting will be determined by the extent to which the growth of jobs will further weaken and whether inflation will be somehow stabilised. Financial markets are expecting further reductions as it stands but Fed officials are not ready to commit to long term promises.
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