The Federal Reserve announced its first interest rate cut of 2025 on Wednesday afternoon, cutting interest rates by a quarter of a percent.
U.S. interest rates will be between 4% and 4.25%. As the central bank tries to combat a slowing job market, its officials project at least two more quarter-percentage-point cuts in 2025. According to Federal Reserve Chair Jerome Powell, these interest rate cuts should lower borrowing costs for mortgages, car loans, and business loans.
“You can think of this, in a way, as a risk management cut,” Powell said in a press conference on Wednesday. “Because if you look at the SEP, actually, the projections for growth for this year and next actually ticked up just a little bit, and inflation and unemployment didn’t really move.”
This quarter-of-a-percent reduction is the first move by the Federal Open Market Committee, the Federal Reserve’s policy-making body, since December, which was criticized by President Donald Trump.
According to Powell, the Federal Reserve delayed changing interest rates to evaluate the effect of Trump’s tariffs and the impact of tighter immigration policies on the economy. However, inflation remains above its 2% target, and consumer spending rose 0.6% last month.
Some bankers are hoping the Federal Reserve’s actions will have a positive impact on the economy.
“I think it’s a good thing. I think the economy’s really in shambles right now. I think everything is highly expensive, and cutting interest rates may not be immediate, but I think down the line it will be [a good thing],” said Susie Teklie, 25, who works on Wall Street.
Federal Reserve officials are now shifting their focus to unemployment. The U.S. Bureau of Labor Statistics reported on Tuesday that employers added 911,000 fewer jobs over the 12 months ending in March than previously estimated.
“You see minority unemployment going up; you see younger people, people who are more vulnerable economically, more susceptible to economic cycles,” Powell said. “That’s one of the reasons, in addition to just lower overall payroll job creation, that shows you that the labor market is weakening.”
Trump attacked Powell in a Truth Social post for being “too late” with the decision and previously called for a more aggressive cut.
“Could somebody please inform Jerome ‘Too Late’ Powell that he is hurting the Housing Industry, very badly? People can’t get a mortgage because of him,” Trump said in a post last month.
Recently, Trump tried to overhaul the Federal Reserve’s independence. In July, he drafted a letter firing Powell. Last month, he called for the resignation of another Federal Reserve Governor. Tuesday’s swearing-in of Stephen Miran, the head of the White House’s Council of Economic Advisers, was Trump’s most recent attempt to sway the central bank. Miran was the only dissent in the 11-1 vote on Wednesday in favor of a half of a percent reduction.
While the Federal Reserve’s decision may not satisfy Trump, some analysts believe the Trump administration and its economic policies’ potential positive impact could sway anti-Trump sentiments.
For Teklie, she said cutting interest rates still does not change her opinion of the president.
“I just don’t think it’s going to do much, honestly. That’s my opinion. Even if the economy does get better from what it is now, I think it’s going to be just as divisive,” she said.
