US Fed delivers expected 25bp cut, warns of rising job risks, with only Miran dissenting
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The news: The US Federal Reserve lowered interest rates by a quarter of a percentage point to a range of 4% to 4.25% in its first cut in nine months. Officials said the move was justified “in light of the shift in the balance of risks,” and noted that “downside risks to employment have risen.”
A narrow majority of Fed officials pencilled in at least two more cuts this year, suggesting possible reductions at both of the central bank’s remaining meetings in October and December.
The context: The decision was not unanimous. New Governor Stephen Miran, sworn in just before the two-day meeting began, dissented in favour of a larger half-point cut. Miran, who is on unpaid leave as a senior economic adviser to President Trump, has said he intends to return to the White House after his term expires early next year.
The rate cut follows signs of labour market weakness. Monthly job gains were revised down from 150,000 to 96,000 for the three months ending in June, and fell to 29,000 over the three months ending in August. The unemployment rate edged up to 4.3% in August. But inflation has also ticked up, with core inflation reaching 2.9% in July, up from 2.6% in April.
New projections showed most Fed officials now expect a further 0.5 percentage points of cuts this year, and one additional 0.25-point reduction in 2026. They forecast core inflation at 3.1% for 2025 and 2.6% in 2026, not returning to the Fed’s 2% target until 2028.
Trump has repeatedly attacked Fed Chair Jerome Powell and recently attempted to fire Governor Lisa Cook. But this week, a federal appeals court upheld Cook’s right to remain on the board and vote at this meeting.
The sources: US Federal Reserve, Bloomberg , The New York Times
