Federal Reserve Cuts Interest Rates Amidst Job Market Concerns

Thu Sep 18 2025 11:44:17 GMT+0300 (Eastern European Summer Time)

In a crucial economic move, the Federal Reserve has cut interest rates by 0.25 percentage points to address worries over a stalling job market, which comes amid continued inflation and political pressure from President Trump.

The Federal Reserve has announced a 0.25 percentage point decrease in its key lending rate, marking its first cut since last December. While this decision aims to stimulate economic activity amidst job market stagnation, it also reflects the complexity of navigating inflation and political pressures from President Trump. Fed Chairman Jerome Powell emphasized the importance of addressing emerging challenges in the labor sector, even as unemployment remains low at 4.3%.

It's finally happening. After months of economic debate and mounting attacks from US President Donald Trump, the US central bank cut interest rates on Wednesday.

The Federal Reserve said it was lowering the target for its key lending rate by 0.25 percentage points. That will put it in a range of 4% to 4.25% - the lowest level since late 2022.

The move - the bank's first rate cut since last December - is expected to kick off a series of additional reductions in the months ahead, which should help bring down borrowing costs across the US.

But this move carries a warning about the economy, reflecting increased consensus at the Fed that a stalling job market needs a boost in the form of lower interest rates.

Unemployment is still low but we're seeing downside risks, Federal Reserve chairman Jerome Powell said at a news conference following the announcement.

Compared to the Fed's July update, which described the job market as solid, Wednesday's cut was supported by 11 of the 12 voting members on the Fed's committee. Stephen Miran, who is on temporary leave from his post leading Trump's Committee of Economic Advisers, voted for a bigger cut of 0.5 percentage points.

The Fed's decision to cut interest rates is not entirely surprising. The inflation that surged in the post-pandemic economy has decreased significantly, prompting central banks in the UK, Europe, Canada, and elsewhere to respond with lower rates. Federal policymakers had indicated for months that they expected to lower borrowing costs by at least half a percentage point this year.

Yet, the US has recently faced rising inflation; prices increased by 2.9% over the year to August, the fastest pace since January, exceeding the Fed's 2% target.

Weakness in the labor market has prompted the Fed's actions, following a lack of substantial job gains in recent months. Senior economist Sarah House from Wells Fargo anticipates rates will drop by 0.75 percentage points by the year's end.

Powell underscored the ongoing low unemployment rate at 4.3%, acknowledging the Fed's challenge in making policy decisions amid current economic conditions.

Wednesday's decision, however, is unlikely to appease President Trump, who has vocally criticized the Fed's reluctance to cut rates further. Trump has called for rates to be as low as 1%, and his administration has put pressure on Powell to facilitate this change.

Critics contend that Trump's actions represent an unprecedented assault on the Fed's independence, a sentiment Powell cautiously addressed during the news conference.

Regardless of the political context, analysts believe the Fed's decision to cut interest rates was driven by economic necessity, rather than presidential influence.