The Federal Reserve cut interest rates by a quarter percentage point on September 17, 2025, marking the first rate cut of the year. Additionally, the Fed signaled the likelihood of two more rate cuts later in 2025, likely around the October and December meetings. This move aims to support the weakening U.S. labor market while managing inflation risks. The current target interest rate range after the cut is 4.0% to 4.25%.
Timing of Rate Cuts
- The first cut happened on September 17, 2025.
- Two more rate cuts are anticipated to occur before the end of the year, with October and December being likely candidates.
Reasons for Cuts
- Signs of a slowing labor market with rising unemployment and long-term unemployment concerns.
- Balancing act between preventing recession and controlling inflation.
- Response to economic pressures including tariffs and consumer spending patterns.
Future Expectations
- The Fed projects at least two more cuts in 2025.
- Outlook for 2026 includes at least one additional rate cut.
- These cuts are part of a cautious and data-dependent approach, focusing on supporting employment while keeping inflation in check.
Thus, the rate cuts are actively occurring now, with a clear policy direction signaling further reductions in the near term.
