SEPTEMBER 22, 2025 – – RATES DOWN BY 25 BPS, FED HINTS AT TWO MORE REDUCTIONS
The Federal Reserve reduced rates by a quarter-percent last week, lowering the benchmark interest rate in the range of 4 to 4.25 percent, the lowest level in almost three years. It marks the first time rates have changed in 2025. The decision to adjust rates was unanimous, though newly appointed Fed Governor Mirren wanted a half-point cut.
The Fed prioritized the weakening labor market over inflation. The Fed stated the rate cut was justified “in light of the shift in the balance of risks”. A decline in the number of people looking for work or finding new jobs got the Fed’s attention.
A narrow majority of the members (10 of 19) penciled in two additional cuts in 2025, which implies rate cuts at both the October and December meetings. However, two members believe one cut more will be enough, and 7 members say no additional cuts should be expected in 2025. The outlook for 2026 is for no rate reductions, with expectations for solid, but slower, economic activity.