The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday (Sept. 17) and indicated it will steadily lower borrowing costs for the rest of this year, as policymakers responded to concerns about weakness in the job market in a move that won support from most of U.S. President Donald Trump’s central bank appointees.
“It’s surprising that it’s taken this long for the Fed to continue its rate cutting program, but it’s an encouraging sign because the second year of rate cuts tend to be encouraging for stock prices,” said Sam Stovall, Chief Investment Strategist at CFRA Research.
The cut, the first move by the policy-setting Federal Open Market Committee since December, moves the policy rate to the 4.00–4.25 percent range.
Only new Governor Stephen Miran, who joined the Fed on Tuesday, Sept. 16, and is on leave as the head of the White House’s Council of Economic Advisers, dissented in favor of a half-percentage-point cut.
The rate cut, along with projections showing two more quarter-percentage-point reductions are anticipated at the remaining two policy meetings this year, indicate Fed officials have begun to downplay the risk that the administration’s voluble trade policies will stoke persistent inflation, and are now more concerned about weakening growth and the likelihood of rising unemployment.
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“I think probably the the most important thing that was stated by Fed Chair Powell today is that the the Fed will continue to be data dependent, will continue to be independent, and will not be pressured by any outside sources,” said Stovall. “So, even though there are three new members that are aligned with the White House, the policy activities are still going to be based upon the data coming about the economy,” Stovall added.
The move to a more consistent pace of cuts was backed by Fed Governor Christopher Waller and Vice Chair of Supervision Michelle Bowman, Trump appointees who dissented at over the policy decision in late July to hold rates steady.
Miran dissented on the latest cut and appears to have penciled in the steepest rate cuts in projections issued after he joined the Board of Governors on Tuesday.
In the newest “dot plot,” one rate projection of 2.875 percent for the end of 2025 stands out as being three-quarters of a percentage point below the next lowest one. Trump has demanded steep rate cuts.
Also voting in favor of the decision was Fed Governor Lisa Cook, who attended the meeting despite Trump’s effort to fire her and after two courts supported her challenge of his attempted dismissal.
New economic projections showed policymakers at the median still see inflation ending this year at 3 percent, well above the central bank’s 2 percent target, a projection unchanged from the Fed’s last set of forecasts published in June. The projection for unemployment was also unchanged at 4.5 percent and economic growth slightly higher at 1.6 percent versus 1.4 percent.
“It is a risk management cut. But at the same time, because the Fed is likely to be cutting rates again in October and December, it’s an effort to put a floor underneath a cooling job market and thereby reduce the risk of recession,” said Stovall.
