Fed Cuts Rates by Quarter Point, Hints at Two More This Year

Washington – The Federal Reserve on Wednesday voted to reduce interest rates by a quarter point and indicated that two additional reductions are likely prior to year's end, citing a slowing labor market even though inflation pressures are still high.

The Federal Open Market Committee cast 11-1 votes to cut the federal funds rate to a band of 4.00%–4.25%. Newly elected Governor Stephen Miran voted against, calling for a more aggressive half-point reduction. It was an expression of relatively mild disagreement with what markets were looking for, with even reliably prudent policymakers Michelle Bowman and Christopher Waller supporting the step.

In its announcement, the Fed stated economic activity has "moderated," employment gains have decelerated, and inflation "remains somewhat elevated." Chair Jerome Powell called the rate cut "risk management" and stated it puts policy in a more neutral position.

Markets responded unevenly to the news. Stocks fluctuated in and out of positive ground while Treasury yields were inconsistent, with short-term falling and longer-term rising. The Fed's closely monitored projections were singled out by analysts, with ten officials predicting two more cuts this year and nine predicting one.

Political pressure has enveloped the central bank over the summer. President Donald Trump has called for more cuts, saying they are needed to resuscitate the housing market and reduce borrowing costs. Miran's dissent was in accordance with those demands, though Powell emphasized there was no general consensus calling for a half-point cut.

Despite resilient consumer spending and slightly stronger growth forecasts, the labor market has weakened. Unemployment reached 4.3% in August, the highest since late 2021, and recent data revisions showed slower job creation than previously reported. With Powell’s term expiring in 2026 and speculation already building about possible successors, the Fed now faces the difficult task of balancing softer employment with persistent inflation risks.