The Federal Reserve has cut interest rates by a quarter percentage point, lowering the upper bound of its federal funds rate to 4.25%.
The decision, which brings rates to their lowest level since November 2022, was widely expected by markets after weeks of weakening labor data and softer inflation readings.
FOMC Trims Target Range by 25 bps, Citing Softer Jobs and Elevated Risks
The move trims the target range from 4.50% to 4.25%, marking the Fed's first rate cut since earlier this year.
Chair Jerome Powell and 10 other members of the Federal Open Market Committee (FOMC) backed the move, while one dissenting voice, Stephen I. Miran, favored a larger half-point reduction.
Fed officials cited slowing economic growth, softer job gains, and rising downside risks to employment as key factors behind the decision.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the FOMC said in its statement, adding that uncertainty about the outlook "remains elevated."
Labor market data has increasingly pointed to strain. Revisions released this week showed the economy created 911,000 fewer jobs in the year through March than initially reported.
The August report showed job growth nearly stalling, with June recording the first monthly losses in over four years. Unemployment rose to 4.3% in August, the highest level since 2021.
Powell has previously described the labor market as facing "downside risks" that could intensify if layoffs increase.
At the same time, inflation has eased compared to earlier in the year but remains above the Fed's 2% target. Wholesale inflation unexpectedly declined in August, with the Producer Price Index slipping 0.1% after a 0.7% rise in July.
On an annual basis, PPI rose 2.6%, far below the 3.3% expected by economists. The weaker-than-forecast print reinforced expectations that the Fed would cut rates this week, sending Bitcoin higher in the days leading up to the decision as traders bet on looser monetary policy.
Political pressure has also loomed large over the Fed. President Donald Trump has repeatedly called for deeper cuts, accusing Powell of moving "too late" and demanding aggressive easing to support housing and reduce government financing costs.
On social media, Trump dismissed the Fed chair as "a total disaster" and pressed for bigger reductions. Miran, a Trump appointee, aligned with this position, voting for a half-point cut.
The decision comes against a backdrop of tariffs that have pushed inflation higher in recent months. Consumer prices climbed to 2.9% in August after dipping to 2.3% in April.