The U.S. Federal Reserve made a decision to reduce interest rates by 0.25% on Wednesday, signaling a commitment to further lowering borrowing costs throughout the remainder of the year in response to concerns regarding job market weakness. The majority of President Donald Trump’s central bank appointees supported this move, with the exception of new governor Stephen Miran, who favored a more aggressive 0.5% rate cut.
This rate reduction, coupled with forecasts indicating the likelihood of two additional 0.25% cuts at the upcoming policy meetings, suggests that Federal Reserve officials are shifting focus away from potential inflation risks due to trade policies towards concerns of economic slowdown and potential increases in unemployment.
The adjustment, the first action taken by the Federal Open Market Committee since December, brings the policy rate to the range of 4-4.25%. The Fed emphasized its attention to the dual mandate risks and noted a rise in downside risks to employment, citing a slowdown in job gains and a slight uptick in the unemployment rate.
Fed Chair Jerome Powell will provide further details on the recent statement and economic outlook during a press conference at 2:30 p.m. ET. The latest economic projections indicate a median expectation of inflation at 3% by the end of the year, exceeding the central bank’s 2% target, as previously forecasted in June. Unemployment projections remain steady at 4.5%, while economic growth forecasts show a slight increase to 1.6%, up from the previous estimate of 1.4%.