Fed Cuts Key Rate Amid Weak Hiring, More Reductions Ahead

After its monthly meeting, the Federal Reserve announced interest rates would slightly drop. Photo from Wikimedia Commons.
News Release
WASHINGTON, D.C. — The Federal Reserve cut its benchmark interest rate by a quarter-point Wednesday, Sept. 17, its first reduction since December, as policymakers shifted focus from inflation to a weakening job market.
The cut decreased the Fed’s short-term rate to about 4.1% from 4.3%. Officials projected two more reductions this year and one in 2026, fewer than investors had expected. The move is intended to ease borrowing costs for consumers and businesses, potentially boosting hiring and growth at a time when job gains have slowed and unemployment has edged higher.
The decision came as inflation remains elevated, rising 2.9% in August from a year earlier, above the Fed’s 2% target. Typically, slower hiring reduces inflationary pressures, but tariffs and other policies have kept price growth stubborn.
Only Stephen Miran, confirmed to the Fed board in a hasty Senate vote hours before the meeting, disagreed with the decision. His addition and Pres. Donald Trump’s broader criticism of the central bank show challenges to Fed independence.
Trump has urged much deeper cuts and attempted to fire Fed governor Lisa Cook, an unprecedented move blocked by the courts.
Chair Jerome Powell has sought to balance slowing job growth with lingering inflation. He has suggested tariffs could temporarily lift prices but argued sluggish demand may help keep inflation in check.
The Fed’s action contrasts with other central banks. The European Central Bank held rates steady, while the Bank of England did the same as it continues to battle higher inflation.