Durrant Pate/Contributor

The Federal Reserve today (September 17) lowered its benchmark interest rate by 25 basis points, bringing the federal funds target range to 4.00 to 4.25 per cent. 

This marks the first rate cut for the year and comes as central bank moves to stabilise a wobbling labour market, even as US President Donald Trump’s tariffs continue to push up prices. The rate cut reflects growing concern over a cooling labour market and persistent economic uncertainty. 

Job growth has slowed noticeably, and the unemployment rate has ticked up to 4.3 per cent. Although inflation remains above the Fed’s two per cent target, the Fed chose to prioritise employment stability, signalling a shift toward a more supportive monetary stance. 

However, today’s decision was not unanimous. Stephen Miran, one of the Fed’s board of governors, dissented, advocating for a deeper 50 basis point cut, citing more urgent risks to economic momentum.

In its announcement, Fed officials indicated they expect two more quarter-point rate cuts this year, with one more expected in 2026. Economic growth was revised slightly upward, but unemployment is forecasted to rise further.

Operationally, the Fed adjusted the interest on reserve balances to 4.15 per cent and maintained its balance sheet runoff strategy. This means it will continue reducing its holdings of Treasury securities and agency mortgage-backed securities, even as it eases rates. 

The Fed emphasised that future policy decisions will remain data-driven, guided by developments in inflation, employment, and broader financial conditions. 

Speaking to journalists, today Fed chair Jerome Powell emphasised that “the balance of risks has shifted” toward the employment side of the reserve’s mandate, whereas the risks had previously been tilted toward inflation