The Federal Reserve lowered its benchmark interest rate by 25 basis points in September, setting the new target range at 4.00% to 4.25%. This marks the Fed’s first rate cut since December and reflects growing concern over a cooling labor market, even as inflation remains slightly above target. Policymakers described the move as a “risk management” measure aimed at supporting employment amid signs of slowing job growth and rising unemployment.
Fed Chair Jerome Powell emphasized that future policy decisions will remain data-dependent, guided by trends in inflation, labor conditions, and overall economic momentum. Updated projections from the Federal Open Market Committee suggest the possibility of up to two additional cuts by year-end, with the federal funds rate potentially ending 2025 around 3.625%.
The decision signals a shift toward a more accommodative stance, with the goal of sustaining economic growth while carefully balancing inflation risks. Markets largely anticipated the move, and investors now expect easing financial conditions to support borrowing and investment heading into 2026.
