The Federal Reserve announced its first interest rate cut of the year on Wednesday, lowering the benchmark rate by a quarter-point.
After a two-day meeting, the Federal Open Market Committee (FOMC) voted to lower the target range to 4.00%-4.25%. President Donald Trump had repeatedly pressured Fed Chair Jerome Powell to adopt aggressive rate cuts to stimulate the economy, calling on Powell as recently as Monday to make cuts “bigger than he had in mind.”
“Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated,” the Federal Reserve’s press release stated.
“American small businesses overwhelmingly want lower interest rates to access the credit they need to take advantage of Republican tax cuts. Wednesday’s rate cut is a step in the right direction and an admission by Chairman Powell that President Trump’s perspective on interest rates has been correct all along,” Alfredo Ortiz, CEO of the Job Creators Network, told the Daily Caller News Foundation. “Tax cuts, rate cuts, and pro-growth Republican policies can fuel a Main Street resurgence that dramatically boosts the labor market and broader economy in the months ahead.”
The Fed’s decision comes in the wake of disappointing jobs data. The August jobs report revealed that the economy added just 22,000 jobs, far below expectations of economists. Additionally, the Bureau of Labor Statistics’ (BLS) revisions to previous employment data indicated that the economy added 911,000 fewer jobs than previously reported over the past year.
At the same time, the consumer price index rose from 2.7% in July to 2.9% in August. While the Fed typically raises rates to curb inflation, indications of weaknesses in the labor market appear to have led officials to favor a rate cut.
The lead-up to the FOMC meeting was marked by unprecedented uncertainty over who would participate and vote on interest rates.
Hours before discussions began, the Senate confirmed Stephen Miran, chairman of the Council of Economic Advisers, to replace Adriana Kugler, who stepped down in August. Also on Monday, an appellate panel ruled in favor of Federal Reserve Governor Lisa Cook, allowing her to remain in her seat while she challenges Trump’s decision to fire her over mortgage fraud allegations.
Miran, who voted to lower the target rate by half a point, was the sole dissenter of an otherwise unanimous decision.
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