Federal Reserve Cuts Interest Rates Amid Concerns Over Job Market Slowdown

Thu Sep 18 2025 11:03:12 GMT+0300 (Eastern European Summer Time)

The Federal Reserve has lowered its key lending rate for the first time since December, responding to troubling trends in the job market despite mixed economic signals.

In a significant move, the Federal Reserve has cut its key lending rates by 0.25 percentage points, the lowest level seen since late 2022. While the decision aims to stimulate the economy amid signs of a slowing job market, Fed Chairman Jerome Powell has expressed caution about potential risks. The move has sparked debates within the committee, reflecting diverse opinions on the economic outlook and the need for further rate cuts.

In a decisive action, the Federal Reserve announced a cut to interest rates on Wednesday, a move that had been anticipated amidst ongoing debates regarding the US economy. The central bank reduced its target lending rate by 0.25 percentage points, lowering it to a range of 4% to 4.25%. This marks the Fed's first rate decrease since December and signals a potential trajectory for further reductions in the coming months.

Despite the cut, Fed Chairman Jerome Powell cautioned about the state of the job market, stating, Unemployment is still low but we're seeing downside risks. This statement reflects a shift in assessment since July, when the job market was characterized as solid. With 11 of the 12 committee members supporting the rate cut, some members pushed for a more aggressive reduction of 0.5 percentage points.

The decision comes against a backdrop of falling inflation rates that prompted previous hikes in interest rates to tame post-pandemic economic pressures. Central banks in other countries have similarly lowered rates, emphasizing the Fed's position in a changing global economic landscape.

Yet, recent labor market statistics have shown subdued job growth, with the economy adding only a minimal number of jobs and experiencing an outright decline in employment in June—the first time since 2020.

This context has led many analysts to speculate that the Fed may lower rates further, potentially by an additional 0.75 percentage points by year’s end. However, a divide persists among committee members regarding the path forward, indicating a complex and evolving economic landscape. Powell indicated that while the economy is not in dire straits, the path forward remains unclear due to various risks—especially in relation to employment trends.

President Donald Trump responded to the Fed's actions with mixed sentiments, having previously pressured for a more significant rate cut. His ongoing criticisms of Powell's leadership reflect a broader conversation about the independence of the Fed and its ability to navigate political pressures.