WASHINGTON, D.C. (LOOTPRESS) – The Federal Reserve on Wednesday announced its first interest rate cut of the year, lowering the benchmark rate by 25 basis points as signs of a weakening labor market outweighed concerns over elevated inflation.
With the move, the federal funds rate now sits in a range of 4% to 4.25%, marking the first cut since December 2024.
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The decision follows five straight meetings earlier this year in which the Fed left rates unchanged amid economic uncertainty.
Policymakers have been closely monitoring data that show hiring has slowed while businesses face challenges tied to trade and immigration policies. Inflation has also remained elevated and ticked higher in recent months, with tariff-related costs adding pressure to consumer prices.
That combination has complicated the Fed’s efforts to achieve both goals of its dual mandate—promoting maximum employment and maintaining stable prices in line with its 2% inflation target.
In its announcement, the Federal Open Market Committee (FOMC) said job gains have slowed and unemployment has risen but remains relatively low. It also noted that inflation has increased and remains elevated. The committee added that “downside risks to employment have risen.”
The decision passed by an 11-1 vote, with only Fed Governor Jeffrey Miran dissenting. Miran, who was confirmed to the role on Monday, supported a larger 50-basis-point cut.
Federal Reserve Chair Jerome Powell said the Fed remains focused on both sides of its mandate, but recent economic developments point to slower growth.
“Overall, the marked slowing in both the supply of and demand for workers is unusual. In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen,” Powell said during a press conference.
“Inflation has eased significantly from its highs in mid-2022, but remains somewhat elevated relative to our 2% longer-run goal.”
The Fed has faced political pressure to cut rates, with President Donald Trump previously threatening to fire Powell. Trump has since backed off those threats, with Powell’s term set to expire in May 2026.
