The U.S. Federal Reserve on Wednesday decided to lower the target range for the federal funds interest rate by 25 basis points to 4 to 4.25 percent, the first rate cut since December 2024, SİA reports citing Reuters.
Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated, the Federal Open Market Committee (FOMC), the principal monetary policymaking body of the Federal Reserve System, said in a statement after a policy meeting.
These developments highlight the Fed’s challenge of balancing its dual mandate—supporting employment while keeping prices stable—against a backdrop of evolving risks.
"In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4-1/4 percent," the statement said. "In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."
The FOMC reiterated its commitment to supporting maximum employment and returning inflation to its 2 percent objective. While 11 members voted in favor of the cut, Stephen Miran argued for a deeper reduction, signaling an internal debate over the pace of monetary easing.
On Monday, a U.S. federal appeals court rejected President Donald Trump's bid to remove Federal Reserve governor Lisa Cook, just hours before the Fed's two-day meeting was set to kick off. That same day, the U.S. Senate narrowly confirmed Stephen Miran, one of Trump’s top economic advisers, to the Board of Governors. He succeeds Adriana Kugler, who resigned in early August.
Miran was sworn in on Tuesday and will serve through Kugler’s remaining term ending Jan. 31, 2026. Along with the rate decision, the FOMC released updated projections: U.S. real GDP growth is now expected to be 1.6 percent in 2025, gradually improving to 1.9 percent in 2027 before easing slightly in 2028.
Meanwhile, unemployment is projected to remain near 4.5 percent before edging lower.
These forecasts indicate a cautious but steady outlook, suggesting that the Fed sees gradual progress toward its long-term goals while keeping a watchful eye on inflationary pressures.
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