The Federal Reserve cuts rates by 25 basis points, with two more cuts expected in 2025.

Amid mounting political pressure and signs of a labor market slowdown , the Federal Reserve announced its first interest rate cut in 2025. The Federal Open Market Committee (FOMC), the central bank's policymaking body, decided to reduce interest rates by 25 basis points (0.25%), bringing the target range to 4%-4.25%. The move, widely anticipated by economists, was approved by 11 votes to one , marking a step toward easing monetary policy after months of stability.

The only dissenting vote came from Stephen Miran , a newly appointed member of the FOMC appointed by the White House and considered a close ally of President Donald Trump . Miran would have preferred a more aggressive 50 basis point (0.5%) cut , in line with Trump's repeated calls for faster monetary policy easing to stimulate the economy and ease the burden of public debt . This divergence highlights the tensions between the Fed and the Trump administration , which has intensified pressure on the central bank, including attempts to influence the composition of the board of governors.

The FOMC statement emphasizes that the Committee will " carefully evaluate incoming data, the evolving outlook, and the balance of risks " before making further adjustments. The Fed reiterates its " strong " commitment to its dual mandate: supporting maximum employment and returning inflation to its 2% target . Should risks arise that could impede these objectives, the central bank declares itself " ready to adjust its monetary policy stance, if necessary ."

This is the first rate cut in 2025 , after the Fed held rates unchanged at 5.25%-5.50%—the highest since 2001—for 14 months, starting in March 2022. During that period, the central bank implemented 11 consecutive rate hikes in 16 months to combat post-pandemic inflation. Rates were reset to 0-0.25% in March 2020 to mitigate the effects of Covid-19, before gradually tightening.

In 2024, the Fed had already begun an easing cycle with three consecutive cuts: 50 basis points in September (the first in four years), followed by two reductions of 25 points each in November and December. Today's cut extends this trend, responding to a labor market showing signs of weakening—with rising unemployment claims—despite inflation rising to 2.9% in August, above the 2% target.

The " dot plots ," FOMC members' quarterly projections of future policy intentions, indicate that a majority expect two further cuts of 25 basis points each by the end of 2025 , for a total of half a percentage point. This scenario reflects a cautious approach, influenced by mixed economic data: on the one hand, the weakness of the labor market, which "clouds inflationary risks" (as noted in surveys of economists); on the other, the need to monitor the impact of the Trump administration's economic policies, including tariffs and tax reforms.

Analysts in a Reuters poll confirmed that 60% expect a 50 basis point cut by the end of the year, while 37% expect a 75 basis point cut. Financial markets, which had already priced in today's cut with a 93% probability, are now pricing in three total cuts in 2025.