By Neha Shaikh
Growboo
The Federal Reserve reduced interest rates on Wednesday for the first time since December, lowering its benchmark range to 4.00%–4.25% and signaling further cuts at upcoming meetings. The move reflects growing concerns about a slowing labor market, even as inflation remains above the Fed’s 2% target.
Fed Chair Jerome Powell acknowledged the difficult balancing act, noting that hiring has slowed, unemployment is rising—particularly among younger and minority workers—and payroll growth is near stall speed. “We don’t need the labor market to soften anymore,” Powell said, stressing that employment concerns are now weighing more heavily in policy decisions.
The cut came amid political drama. President Donald Trump recently attempted to remove Fed Governor Lisa Cook and installed his economic adviser, Stephen Miran, as a new board member. Miran cast the sole dissenting vote, pushing for a deeper 50-basis-point cut and signaling support for even steeper reductions in the coming months. Analysts attributed the most aggressive rate projection in the Fed’s forecasts to him.
Despite Trump’s pressure, Powell insisted the Fed remains independent. “It’s deeply in our culture to base decisions on data, never politics,” he said, adding that support for a larger cut was limited.
Most policymakers agreed to proceed gradually, weighing risks from both inflation—still projected at 3% this year—and weakening employment. New forecasts show economic growth improving slightly to 1.6% from 1.4% in June, while unemployment is expected to hold around 4.5%.
Markets reacted cautiously to the announcement. Stocks briefly rose before ending mixed, the dollar edged higher, and Treasury yields stayed steady. Traders now see a strong chance of another cut when the Fed meets again in October.
