For the first time this year – worried about rising inflation and under immense pressure from President Donald Trump – the Federal Reserve’s governing board voted to cut its key interest rate.
After its meeting Wednesday, the FOMC cut its key interest rate by a quarter-point to about 4.1%. The committee also indicated it expects two more rate cuts before the end of the year with growing concern about the U.S. labor market following lower-than-expected jobs numbers and a slowly climbing unemployment rate.
It’s the first time the Fed has cut rates since December and dropped its rate down from 4.3%. The Fed, led by Chair Jerome Powell, had kept their rate unchanged this year while evaluating the impact of tariffs, tighter immigration enforcement and other Trump administration policies on inflation and the economy, The Associated Press reported.
The central bank has changed its focus from inflation, which remains modestly above its 2% target, to jobs. Lower interest rates could reduce borrowing costs for mortgages, car loans, and business loans, and boost growth and hiring, the AP reported.
“In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen,” Powell said at a press conference following the Fed’s two-day meeting.
While indications are the Fed will lower rates twice more this year, they hinted at just a single rate cut in 2026. Before the meeting, investors on Wall Street had projected five cuts for the rest of this year and next, the AP reported. Stocks wavered a bit as Powell took questions from reporters. The S&P 500 was down 0.1% as of 3:10 p.m. ET.
Stephen Miran, appointed by President Donald Trump to fill an expiring term and confirmed by the Senate only hours before the meeting, was the lone dissenting vote. Miran reportedly wanted a half-point cut, but Powell told reporters there wasn’t “very much support” for the bigger-size cut among Fed officials.
