Federal Reserve cuts interest rates by a quarter point, for first time in nearly a year – live updates | Federal Reserve
Fed cuts interest rate by a quarter point
The Fed just announced an interest rate cut by a quarter point, which was largely anticipated amid a weakening labor market.
This is the first time the Fed has cut rates since December 2024. Rates now stand at a range of 4% to 4.25%, the lowest since November 2022.
Stay tuned for a press conference Fed chair Jerome Powell is expected to give at 2.30pm ET.
Key events
Powell responded to a question about comments new Fed governor Stephen Miran made at his confirmation hearing in front of the Senate earlier this week.
Miran said that the Fed actually has a “third mandate”, which is to “moderate long-term interest rates”.
The introduction of a third mandate is in opposition to how Powell has framed the Fed’s “dual mandate” – balancing unemployment and price increases.
“We always think of it as the dual mandate,” Powell said, explaining that moderate interest rates come from stable inflation.
“As far as I’m concerned, there’s no thought of … incorporating that in a different way,” he said.
Markets appear to be relatively unresponsiveness to the Fed’s highly anticipated rate cut. Both the S&P and Nasdaq are both slightly down for the day, while the Dow is up.
It’s a stark contrast to last week, when markets shot up at data that showed wholesale prices falling slightly in August, and consumer inflation being within expectations for the month.
The overall picture that Powell has painted of the economy in his press conference isn’t necessarily one that’s thriving. Powell said that the economy has left the Fed in an “unusual” situation, and said that the Fed’s rate cut is more about “risk management” rather than an testament to a strong economy. The recent rate cut could cause inflation to rise, but risks of the job market worsening under current rates are higher.
“We’ve seen much more challenging economic times from a policy standpoint, the standpoint of what we’re trying to accomplish, it’s challenging to know what to do,” Powell said. “There are no risk-free paths now.”
Powell suggests only ‘really strong arguments’ not politics can move Fed board decisions
Powell was, again, questioned about Stephen Miran’s role as both a new Fed governor and Trump’s chair to the Council of Economic Advisor.
A reporter asked Powell how the Fed can be nonpolitical if one of its voting members is explicitly connected to politics. Powell emphasized that there are 12 voting members and 19 total participants on the board.
“The only way for any voter to really move things around is to be incredibly persuasive, and the only way to do that in the context in which we work is to make really strong arguments based on the data and one’s understanding of the economy,” Powell said. “That’s really all that matters. … That’s in the DNA of the institution, that’s not going to change.”
A Politico reporter asked Powell how Americans will be able to tell if the Fed, which has historically been nonpartisan, starts to be partisan.
“We don’t frame these questions at all or see them in terms of political outcomes. In another part of Washington, everything is seen through the lens of does it help or hurt this political party, this politicians,” Powell said. “That’s the framework. People find it hard to believe that’s not at all the way we think about things at the Fed. We take a longer perspective, we’re trying to serve the American people as best as we can.”
“I think you would be able to tell. I don’t think we’ll ever get to that place.”
When asked about Fed governor Lisa Cook’s lawsuit against Donald Trump for her firing (a court reinstated her last week), Powell said: “I see it as a court case that I would see as inappropriate for me to comment on.”
Powell said that Fed officials are expecting inflation from tariffs to be a one-time price level increase, though “we can’t just assume that, [and] or job is to make sure that’s what happens.”
“We continue to expect it to move up,” Powell said of prices. “Maybe not as high as we would have expected it to.”
He added that the case for “persistent inflation” is weaker.
Which is why the Fed cut rates, what he described as a “neutral” policy, given that inflation isn’t out of control, but the labor market has slowed down.
But Powell acknowledged that it’s “an unusual situation” – the Fed would most likely want to be more careful with rate cuts because of inflation, but has to be wary of the labor market.
“Our tools can’t do two things at once,” he said.
Powell describes labor market as being in a ‘curious balance’ as demand is down at same time as worker supply dropped
Powell is again describing the labor market as being in a “curious balance” – a term that he first used in his Jackson Hole speech last month.
The labor market is balanced out, meaning that the supply of workers is on par with the demand that employers have for workers, but it’s not necessarily a sign of strength.
Because of immigration, “the supply of workers is coming down”, Powell noted. “At the same time, demand for workers has come down quite sharply to the point where we see what I’ve called a ‘curious balance’.”
“Typically, when we say things are in balance that sounds good,” he added. “But in this case, the balance is because both demand and supply have come down sharply, now demand is coming down more sharply because we now see the unemployment rate going up.”
A reporter asked Jerome Powell about Stephen Miran’s appointment, specifically on the fact that Miran is the first Fed governor to also have a role in the executive branch while also serving on the Fed board. Miran is the chair of the Council of Economic Advisors.
“The committee remains united in pursuing our dual mandate goals,” Powell said in response. “We’re strongly committed to maintaining our independence and beyond that, I really don’t have anything to share.”
Powell holds press conference on rate cut decision
Fed chair Jerome Powell just started his press conference on the Fed’s rate cut decision.
As outlined in the board’s statement, Powell said that the unemployment rate, while still generally low, has edged up.
“Job gains have slowed and the downside risks to unemployment have risen,” he said.
Powell pointed to new immigration policy as a major factor in the labor market slowdown.
“A good part of the slowing likely reflects a decline in the growth of the labor force, due to lower immigration and lower labor force participation,” Powell said. “Even so, labor demand has softened and the recent pace of job creation appears to be running below the breakeven rate needed to hold the unemployment rate constant.”
The median projection for the unemployment rate, which is currently at 4.3%, sees it rising to 4.5% by the end of the year.
Powells also said higher tariffs have begun to push up some prices in some categories of goods, though the full impact have yet to be seen. Price increases due to tariffs could be a one-time price increase or it could lead to “persistent” inflation.
“Our obligation is to ensure that a one-time price increase in the price level does not become an ongoing inflation problem,” he said.
Much of this is what Powell said during his speech last month at the Fed’s symposium in Jackson Hole, during which he first suggested that the Fed was looking toward an interest rate cut.
In economic projections released after the Fed’s rate-cute decision, members of the Fed’s board submitted their economic predictions for the economy over the next few years.
A slight majority of board members seem to expect another rate cut by the end of the year, while a majority see more rate cuts in 2026. Board members are predicting a slight increase in unemployment, though they seem to think that inflation will largely cool in 2026 and 2027.
It’s a more dovish take on the economy than how the Fed is describing the current economy in its board statement, where the Fed said that the labor market has slowed and inflation is going up – a dynamic that points to an economic condition known as stagflation.
Before Fed chair Jerome Powell can expand on the Fed’s decision in his 2.30pm ET press conference, right now we just have the Fed’s statement on its rate cut to parse through why officials voted for a cut.
Notably, the Fed’s rate-setting board took note of the jobs market.
“Job gains have slowed, and the unemployment rate has edged up but remains low,” it said. It also noted that “inflation has moved up and remains somewhat elevated”.
This is a change from the board’s last meeting in July, when it said that labor market conditions “remain solid”. And this is the first time the board has said inflation is going up.
The statement also noted that Stephen Miran, Trump’s appointee to the board who was confirmed on Monday, was the only member of the board to vote against the rate cut. Miran wanted to lower rates by a half-point, instead of a quarter-point.
Fed cuts interest rate by a quarter point
The Fed just announced an interest rate cut by a quarter point, which was largely anticipated amid a weakening labor market.
This is the first time the Fed has cut rates since December 2024. Rates now stand at a range of 4% to 4.25%, the lowest since November 2022.
Stay tuned for a press conference Fed chair Jerome Powell is expected to give at 2.30pm ET.
Inflation rose slightly in August as companies continued to push the cost of tariffs on to consumers.
The newest update to the consumer price index (CPI), which measures a basket of goods and services, showed that prices increased 2.9% over the last year – the highest since January. Core CPI, which excludes energy and food costs, stayed stable at 3.1% after going up in July.
Despite this slight uptick in inflation, Wall Street remains optimistic that the Federal Reserve will cut interest rates at the central bank’s board meeting next week. The Fed is under intense pressure from Donald Trump to cut rates, but the decision looks likely to be led by fears that the US jobs market is weakening.
Investors are anticipating a quarter-point rate cut. Rates currently stand at a range of 4.25% to 5.5%.
The Fed chair Jerome Powell indicated last month that the central bank was gearing up to cut interest rates for the first time this year.
For months, policymakers defied public calls from Trump to lower rates – and brushed off his increasingly aggressive criticism of the Fed’s decision to hold them steady.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in a closely scrutinized speech at the Jackson Hole symposium in Wyoming, highlighting a “challenging” dichotomy of risks: that Trump’s tariffs might increase inflation, while his immigration policies knock the US labor market.
Concerning economic signs, including data indicating that the labor market has stalled while inflation picked up, have reinforced expectations that many policymakers will want to tread carefully in the months ahead.
Trump has already suggested that he will be unhappy with the modest cut the Fed is widely expected to unveil later. Powell “MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND”, the US president wrote on his Truth Social platform early on Monday, claiming: “HOUSING WILL SOAR!!!”
Callum Jones
The Trump administration’s extraordinary bid to fire Lisa Cook, a Fed governor appointed by Biden, and remove her from the central bank’s board before this meeting, has so far failed.
Late on Monday, a federal appeals court rejected Trump’s request to block Cook from attending the Fed’s latest rate-setting session, which started yesterday.
The president cited unconfirmed allegations of mortgage fraud as he attempted to fire Cook, who has denied wrongdoing and argued Trump has no authority to fire her. Her term is not due to expire until 2038.
No president has pursued such action – and moved to dismiss a governor at the Fed, which has long been independent from political interference – since the central bank’s founding in 1913.
Trump has made no secret of his hopes to increase his oversight of the Fed, calling into question the future of its longstanding independence from political oversight by publicly describing plans to swiftly build “a majority” on its board.
Callum Jones
The Trump administration raced to strengthen its influence over the Fed ahead of this week’s meeting.
Stephen Miran, a senior official who served as chair of the White House council of economic advisers, was confirmed by Senate Republicans as a Fed governor on Monday evening, and formally sworn in on Tuesday.
His appointment marks the first time in the history of the modern Federal Reserve, which stretches back almost a century, that a sitting member of the executive branch will also work at the highest levels of the central bank.
While Miran described the Fed’s independence as “critical” during a confirmation hearing earlier this month, and pledged to preserve it as governor, his decision to only take unpaid leave from his current job at the White House, rather than resign, raised questions over his ability to operate independently.
Federal Reserve expected to cut interest rates amid Trump pressure
The US Federal Reserve is expected to announce the first interest rate cut since December as a two-day policy meeting nears its end.
The Fed started the meeting on Tuesday, hours after Donald Trump’s new appointee narrowly won confirmation to join the central bank – while Fed governor Lisa Cook continues to fight her removal by the president.
Stephen Miran, the chair of Trump’s Council of Economic Advisers, took the oath of office as a Fed governor early on Tuesday after narrowly winning a Senate confirmation vote along party lines on Monday night.
There is little doubt that the Fed will make its first interest rate cut of 2025 after the latest gathering, as policymakers pivot towards shoring up a deteriorating jobs market.
But concerns about political influence targeting the independent central bank looms over the gathering, as Trump repeatedly bashes Fed Chair Jerome Powell over his rate decisions, and after he moved to fire governor Lisa Cook, sparking a legal battle.
On Tuesday, Trump told reporters that the Fed should “listen to smart people like me”.
