Fed announces quarter-point rate cut
First meeting to include Trump's governor pick
By: Bailey Schulz
and Rachel Barber
USA Today
..... After nine months of staying on the sidelines, the Federal Reserve on September 17 [2025] announced a quarter-percentage-points cut, likely the first in a series of reductions to usher in lower borrowing rates for consumers.
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The rate cut - the Fed's first since December 2024 - lowers its benchmark interest rate to a range of 4% to 4.25%. Officials signaled the possibility of enacting two more rate cuts later this year. [2025]
..... Typically, the fed hikes rates or keeps them steady to tame inflation. The central bank lowers rates to juice the economy. while the Fed previously held back on rate cuts due to inflation concerns, a series of disappointing jobs reports showed a weakening labor market. The Fed began to hike interest rates in 2022 to cool rapid inflation, which hit a peak of 9.1% that June.
..... Rates rose from nearly 0% to a two-decade high of 5.25% to 5.5% in July 2023. It began to trim rates in 2024 as inflation cooled, but it held rates steady in 2025 until the September [2025] meeting as officials waited to see how President Donald Trump's tariffs impact consumer prices. "Job have slowed, and the unemployment rate has edged up but remains low. Informational has moved up and remains somewhat elevated," the Fed said in a September 17 [2025] statement.
..... Fed chair Jerome Powell said the September [2025] rate cut presumably will be better for a "low firing, low hiring: labor market that is particularly challenging to navigate for recent college graduates, younger people and minorities.
..... "The concern is if you start to see layoffs, there won't be a lot of hiring going on," which would lead to higher unemployment, Powell said.
..... In a relates step, the board approved a quarter-percentage-point decrease in the primary credit rate to 4.25%.
New governor dissents
..... New Fed Governor Stephen Miran dissented, saying he preferred a half-percentage-point cut to the benchmark interest rate.
..... It was the first meeting to include Miran, Trump's pick to fill a vacancy on the Federal Reserve board of governors, who was narrowly confirmed September 15. [2025] Fed Governor Lisa Cook also participated in the meeting after an appeals court gave her permission to continue her duties during her court battle to counter Trump's attempt to fire hear.
..... Powell kept his response short when asked about whether the recent appointment of Miran, who has ties to the
executive branch, would compromise the Fed's independence form day-to-day politics. "the committee remains united in pursuing our dual mandate goals," Powell said. "We're strongly committed to maintaining our independence, and beyond that, I really don't have anything to share." However, the Fed chair did further express confidence in the committee's ability to avoid succumbing to political pressure.
..... "It's deeply in our culture to do our work based on the incoming data and never consider anything else," Powell said. If the Federal Open Market Committee made decisions based on political outcomes, Powell said "you would be able to tell" by the way he and other governors spoke about the committee's decisions. "I don't think we will ever get to that place," Powell said. "(We're) doing our work exactly as we always have now." Miran said he would take an unpaid leave of absence from his role as chairman of the White House Council of Economic Advisers while serving on the Fed's board of governors.
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Powell also declined to comment on Cook's court battle, saying "it would be inappropriate" for him to weight in.
Estimating future cuts for 2025
..... The Fed released its quarterly dot plot, which outlines where officials believe interest rates will move next.
..... Nine Fed officials went with a rate between 3.5% and 3.75% by the end of 2025. One went with a rate between 2.75% and 3.0%. Six went with a rate between 4.0 to 4.25%.
..... Estimates for 2026, 2027, 2028 and the loner run all show members estimating lower rates under 4.0%.
Tariff's impact
..... Powell said it's "certainly possible" tariffs are driving the slowdown in the labor market, but mitigation likely plays a bigger role.
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"There's very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply," Powell said.
..... As for inflation, Powell said "a reasonable base case" is that tariffs' effects on initiation will be relatively short-lived. It's the Fed's job, he said, to make sure the one-time increase in prices doesn't become an ongoing inflation problem.
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"We have begun to see goods prices showing through into higher inflation. And actually, the increase in goods prices accounts for most pf the increase in inflation, or perhaps all of the increase in inflation, over the course of this year," [2025] Powell said, adding that the effects so far are small but are expected to build over the course of the year and into 2026.
Mortgage rates, FICO scores
..... Powell said while the Fed's rate decision tend to impact mortgage rates, the Fed would likely need to launch "pretty big" rate changes for it to matter "a lot" for the housing sector.
..... "There's a deeper problem here, not a cyclical problem the fed can address, and that's pretty much a nationwide housing shortage," Powell said. "A lot of places in the country just don't have enough housing for people."
..... He added that achieving maximum employment and prices stability - which can require higher interest rates - can promote a strong economy, which is "a good economy for housing."
..... The average 30-eyar fixed-rate mortgage averaged 6.35% as of September 11, [2025] according to Feddie Mac.
..... Powell also said he is watching FICO scores after the average score has fallen two points in 2025.