The Federal Reserve has lowered interest rates by a quarter percentage point and flagged two more cuts this year, citing rising risks in the labour market despite inflation staying elevated.
In an 11–1 vote, the Federal Open Market Committee reduced the benchmark rate to 4.00–4.25 per cent. New governor Stephen Miran dissented, calling for a half-point cut. Chair Jerome Powell described the move as “risk management,” saying policy was now closer to neutral.
Markets were volatile after the decision, with stocks swinging and Treasury yields mixed. Allianz economist Dan North said the Fed was “definitely trying to manage the economy.”
The Fed’s “dot plot” showed most officials expect two further cuts in 2025, likely in October and December, though forecasts diverged. Goldman Sachs’ Simon Dangoor said doves are “in the driver’s seat” unless jobs or inflation rebound sharply.
The meeting unfolded against political tension, with Donald Trump pressing for deeper cuts and Miran seen as aligned with him. A court also blocked Trump from removing Governor Lisa Cook, who voted for the quarter-point move.
Unemployment has climbed to 4.3 per cent, the highest since 2021, and revised data show nearly a million fewer jobs were created over the past year than first reported. Some officials, including Christopher Waller, argue easing is needed now to prevent further weakness.
