Fed Cuts Interest Rate For First Time Since December

The Federal Reserve has cut its key interest rate, reducing borrowing costs in an effort to boost hiring and prevent a surge of unemployment.

The central bank’s policy committee voted Wednesday to lower the fed funds rate by a quarter-point to a range of 4% to 4.25%, the first cut since December and its lowest level since December 2022. Fed officials predicted two more such reductions are likely for the remainder of the year, to a range of 3.5% to 3.75%, according to a set of quarterly economic projections released alongside the interest rate decision. That was one more quarter-point cut than officials expected in June, the last time they made economic projections.

The Fed has held the rate steady so far this year to push down inflation, which is still running over the Fed’s target of a 2% annual rate. However, officials have recently grown more concerned that President Donald Trump’s trade wars are slowing down the economy and risk causing a wave of unemployment. The fed funds rate sets the rate at which banks lend money to one another, and influences borrowing costs on credit cards, car loans, and many other kinds of debt.

“The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” The committee said in a statement.

The vote of the 12-member committee was split, with 11 voting for the quarter-point cut and one, the newly appointed Stephen Miran, voting for a larger half-point reduction.

The divided vote reflects the difficult decisions the Fed faces as it tries to fulfill its dual mandate to keep inflation low and employment high. The Fed could keep interest rates higher for longer to discourage spending and fight inflation, or lower them to boost the economy and encourage hiring, but it can’t do both simultaneously. Fed officials have said tariffs pose risks to both sides of the mandate.

The independent central bank is also under an unusually high political pressure. Trump has demanded that the central bank, independent of direct control from the White House, cut rates by three percentage points or more.

He has also taken steps to control of the Fed, attempting to fire Fed Governor Lisa Cook, a member of the 12-person interest rate committee, to replace her with his own nominee. That move was temporarily blocked by the courts, allowing her to participate in this week’s two-day meeting. Cook voted with the majority to lower the rate by a quarter-point.