The Federal Reserve cut its key interest rate by a quarter-point Wednesday and projected it would do so twice more this year as concern grows at the central bank about the health of the nation’s labor market.
The move is the Fed’s first cut since December and lowered its short-term rate to about 4.1 per cent, down from 4.3 per cent. Fed officials, led by Chair Jerome Powell, had kept their rate unchanged this year as they evaluated the impact of tariffs, tighter immigration enforcement, and other Trump administration policies on inflation and the economy.
Yet the central bank’s focus has shifted quickly from inflation, which remains modestly above its two per cent target, to jobs, as hiring has grounded nearly to a halt in recent months and the unemployment rate has ticked higher. Lower interest rates could reduce borrowing costs for mortgages, car loans, and business loans, and boost growth and hiring.
“Downside risks to employment have risen,” the Fed said in a statement after its two-day meeting.
Fed officials also signaled that they expect to reduce their key rate twice more this year, but just once in 2026, which may disappoint Wall Street. Before the meeting, investors had projected five cuts for the rest of this year and next.
Just one Fed policymaker dissented from the decision: Stephen Miran, who President Donald Trump appointed and was confirmed by the Senate in a rushed vote late Monday just hours before the meeting began. Many economists forecast additional dissents, and the outcome suggests that Powell was able to patch together a show of unity from a committee that includes Miran and two other Trump appointees from his first term.
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