Washington, September 18, 2025 – After keeping interest rates unchanged for nine months, the US Federal Reserve has finally lowered rates by 25 basis points, setting the new federal funds rate range at 4%–4.25%. While markets had already expected this move, questions remain over how far the Fed will go with further cuts this year.
According to the Fed’s latest projections, nine out of 19 policymakers believe rates could fall another 50 basis points before the end of 2025, bringing them down to between 3.5% and 4%. However, six officials feel the Fed should pause rate cuts for now.
“It’s challenging to know what to do. There are no risk-free paths now,” Fed Chair Jerome Powell told reporters after the decision.
Weak Job Growth Adds Pressure
The US economy has been showing clear signs of a slowdown in the job market. The Fed’s statement noted that “job gains have slowed” and that risks to employment are rising. Recent government data shows that non-farm job growth has averaged less than 27,000 per month since May, a sharp drop compared to earlier this year.
Adding to the uncertainty, former US President Donald Trump has been openly criticizing official employment data. In August, Trump fired Erika McEntarfer, head of the Bureau of Labor Statistics (BLS), after calling the numbers “rigged.” McEntarfer later warned that firing statisticians for unfavorable data could damage trust in US economic reporting, comparing the risks to crises seen in countries like Argentina, Greece, and Turkey.
Balancing Inflation and Employment
Powell described the latest rate cut as a “risk management move”, acknowledging that while the labor market is weakening, the impact of Trump’s tariff policies on inflation is still unfolding.
Economists believe the Fed is now caught between two major risks:
1. Protecting jobs in a slowing economy.
2. Preventing inflation from rising too quickly.
Trump’s Growing Influence on the Fed
The rate cut also highlighted a new challenge – the Fed’s independence from political pressure. Out of the 12 voting members, 11 supported the 25 bps cut, while one member, Stephen Miran, pushed for a deeper 50 bps cut.
Miran was appointed to the Fed just this week by Trump and is still officially a White House staffer on unpaid leave – a first in the Fed’s history. His presence has raised concerns that Trump may be using appointments to influence central bank policy more directly.
Trump has repeatedly called for larger and faster rate cuts, arguing that they are necessary to boost growth. Powell, whose term as Fed Chair ends in May 2026, now faces the difficult task of balancing economic data with political pressure.
Market Reaction
Investors were not surprised by the move. Data from LSEG showed that markets had already priced in the rate cut. The Dow Jones Industrial Average remained positive after the announcement, reflecting investor confidence that the Fed is moving to support the economy.
Conclusion
The Fed’s first rate cut in nearly a year highlights the tough choices it faces as the US economy slows. While Powell insists the decision was based on economic risks, Trump’s influence is becoming more visible, raising questions about the central bank’s independence in the months ahead.