The US Federal Reserve lowered interest rates by 25 basis points on Wednesday, cutting its benchmark range to 4%–4.25%. It marked the first rate reduction of 2025 and the first since December last year. Officials said the decision aimed to reduce risks to employment as the labour market shows early signs of weakness.
Fed Chair Jerome Powell explained that unemployment remains low but job creation has slowed. He added that “downside risks to employment have risen,” while inflation remains above target at 2.9%. Powell stressed that the Fed remains committed to keeping inflation expectations anchored around the 2% goal.
The vote was nearly unanimous, though newly appointed Fed governor Stephen Miran, President Donald Trump’s nominee to replace Powell, pushed for a larger 0.5% cut. Powell downplayed speculation of wider support for such a move, noting there was no broad backing for a deeper cut.
The rate cut highlights divisions inside the Federal Open Market Committee over the policy outlook. According to The Kobeissi Letter, nine Fed officials see two more rate cuts this year, while six forecast none.
Powell acknowledged the debate but reinforced the Fed’s independence from the White House. He said it was “inappropriate” to comment on ongoing legal disputes, including the case involving Governor Lisa Cook. Powell also dismissed concerns that Miran’s appointment compromises the Fed’s autonomy, adding that the central bank remains “strongly committed to maintaining our independence.”
Gross domestic product growth slowed to about 1.5% in the first half of 2025, down from 2.5% in 2024. Powell attributed much of this to weaker consumer spending. He noted that the housing sector remains sluggish, with high borrowing costs still limiting demand.
Economists said the cut was intended to prevent further job market deterioration. Michael Pearce, deputy chief US economist at Oxford Economics, said the October meeting would hinge on upcoming employment data.
CME futures markets currently assign an 87.7% chance of another 25 basis point cut at the next Fed meeting on 29 October. The Fed’s updated “dot plot” showed a median estimate of two additional cuts before the year ends.
The immediate crypto market reaction was muted, as traders had already priced in the move. Furthermore, Bitcoin experienced a quick surge to about $117,550 and later settled around $117,000. Ethereum rose more than 4%, trading near $4,600, and Solana, Dogecoin, Cardano, Hyperliquid, and Avalanche also saw modest gains.