Federal Reserve commits to first interest rate cut in 9 months
- Alexangel Ventura
- Sep 17
- 2 min read
Following extensive debate in the Federal Reserve's September meeting, a resolution was decided to cut interest rates by a modest 25 basis points, reflecting current economic conditions.
For months, investors have longed for a rate cut as a result of gradually weakening labor data and slow economic growth. While CPI hikes initially posed a threat to the future possibilities of a rate cut, ultimately the advent of job losses and a nearly 1 million job revision for a one-year period between 2024 and 2025 caused the Fed to shift focus from tackling short-term tariff-related inflationary pressures to the labor market. And such rate cut could do that.
Many have hedged their bets on a 25 basis point cut, but over the past few weeks a movement calling for a 50 basis point cut gained traction, citing job losses in manufacturing and the federal government in August.
While the Fed eventually fixed on a 25 basis point rate cut, investors were not very happy with the results.
The Federal Reserve cited concerns as a reason for cutting rates. "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," said the Fed on its official website.
In addition, Jerome Powell in his post-meeting speech to the press that the cut was "never really in doubt," however noted that "Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen."
The two factors: slow job growth and Fed uncertainty, caused investors to have some mild fear in reaction. Stocks stagnated on Wednesday despite such an announcement as significant as a rate cut, reflecting weakening optimism.
