Fed’s Cuts Quarter Point, Signals Two More Rates Cuts by Year End

the staff of the Ridgewood blog

New York NY,  the Federal Reserve cut interest rates by a quarter percentage point to 4.00%-4.25% amid rising unemployment fears and sticky inflation. In an 11-1 vote, the FOMC hinted at two more cuts by year-end, prioritizing a cooling job market over persistent price pressures.

Fed’s Quarter-Point Cut: Slight Ease on Borrowing Costs

In a move Wall Street largely expected but with less internal drama than predicted, the Federal Open Market Committee (FOMC) voted 11-1 to lower the federal funds rate by 0.25% on September 17, 2025. Newly appointed Governor Stephen Miran was the lone dissenter, pushing for a bolder 0.50% slash. The decision targets the overnight lending rate, aiming to ease borrowing costs as job growth slows and unemployment ticks up to 4.3%.

The FOMC statement noted, “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.”

Two More Cuts Coming? Fed’s Plan to Battle Labor Woes

The Fed isn’t stopping here. The statement signals “two more” rate reductions before year’s end, shifting focus from inflation to “downside risks to employment.” Chair Jerome H. Powell and the committee emphasized, “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.” This pivot comes as August 2025 added just 22,000 jobs—far below the 75,000 forecast—highlighting labor market fragility.

The Dissent: Miran’s Call for Bigger Action

Governor Stephen Miran broke ranks, advocating a half-point cut to aggressively tackle unemployment. His vote underscores internal debates, but the majority stuck with a cautious approach. The FOMC affirmed, “In considering additional adjustments… the Committee will carefully assess incoming data.” Voters included Chair Powell, Vice Chair John C. Williams, and others like Michelle Bowman and Austan Goolsbee.

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