In September 2025, the Federal Reserve, under Chair Jerome Powell, reduced its benchmark interest rate by 25 basis points, setting the new target range at 4.00%–4.25%. This marks the central bank’s first rate cut of the year, aimed at addressing a cooling labor market and slowing job creation, even as inflation continues to remain above target levels.
According to the latest policy outlook, officials project two more quarter-point rate cuts by the end of 2025 and an additional reduction in 2026. Powell, however, stressed that any further action will depend on economic data, including employment figures, inflation trends, and overall growth indicators.
The financial markets responded cautiously. While lower borrowing costs raised optimism in some sectors, concerns linger over persistent inflation and the pace of future cuts. Powell emphasized that monetary easing would be gradual and data-driven rather than aggressive.
Economists point to slowing hiring, layoffs, and downward revisions to employment data as signs that the labor market is losing momentum. At the same time, sticky inflation in housing, goods, and services remains a challenge, leaving the Fed in a delicate balancing act between supporting growth and controlling prices.
