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US Fed meeting: Five key takeaways—interest rate cut to US GDP growth forecast
The US Federal Reserve has cut its benchmark interest rate for the first time in 2025, while penciling in two more rate cuts before the year ends.
The US Federal Reserve has lowered interest rates for the first time in 2025, flagging slower job gains and risks to employment, but pencilled in two more rate cuts before the year ends.
The US Fed cut the benchmark lending rate by 25 basis points, to a range between 4.0% and 4.25%. At the same time, the central bank lifted its US GDP growth forecast to 1.6% for 2025 from 1.4% in June. It made no change to its unemployment and inflation forecasts.
One basis point is one-hundredth of a percentage point.
The US Fed, in a statement announcing its rate cut, said that “downside risks to employment have risen,” even as inflation has “moved up and remains somewhat elevated”. It noted that job gains have slowed while the unemployment rate has inched up—even as it “remains low”.
Only new Fed Governor Stephen Miran, a Trump ally, voted against this decision, preferring a larger rate reduction. The other 11 voting members of the Federal Open Market Committee voted for the quarter-point cut.
Here are key takeaways from the US Fed meeting on Wednesday:
- The Federal Open Market Committee voted 11-1 to lower the benchmark interest rate by a quarter point to a target range of 4%-4.25%
- “Dot plot” of rate projections shows the median official expected to lower rates by another half percentage point by the end of 2025, and a quarter point in 2026.
- US Fed Governor Stephen Miran, who joined the board this week, voted against the decision in favour of lowering rates by half a percentage point.
- The FOMC statement says “job gains have slowed, and the unemployment rate has edged up but remains low” and “downside risks to employment have risen” while inflation “has moved up and remains somewhat elevated”.
- The US Fed maintains an underlying inflation estimate of 3.1% at the end of 2025, the same as forecast in June, and lifts US GDP growth estimates to 1.6% by end of 2025 and 1.8% in 2026, up from 1.4% and 1.6% previously.
The US Treasuries rallied and the dollar extended its drop, while the S&P 500 reversed an initial jump after the rate cut decision.
