The US Federal Reserve cuts interest rates to the range between 4.0% and 4.25%from 4.25-4.50% previous, as expected by the market. After five consecutive meetings in which he decided to keep the stable rates, the agency, chaired by Jerome Powell, takes the step on this occasion, after 9 months without changes.
The Fed statement suggests that «recent indicators suggest that the growth of economic activity was moderated in the first half of the year.» In addition, it ensures that the increase in employment has slowed down and the unemployment rate has risen slightly, «But it is still low»to then add that «They have increased downward risks for employment». Inflation has risen and remains somewhat high, while Uncertainty about economic perspectives «remains high.»
As expected, the evaluations of the committee, they add, «will take into account a wide range of information, including data on labor market conditions, inflationary pressures and inflation expectations, as well as financial and international evolution.»
All members of the FOMC voted in favor of this decision, except Stephen I. Miran, who preferred to reduce the objective range for the federal funds at half a percentage point at this meeting. According to Jerome Powell, «There was no generalized support at all for a 50 basic points cut today»then adding that «we have decided rates of very large rates and cuts of very large rates in the last five years, and one tends to do them at a time when feeling that monetary policy is out of place and needs to move quickly to a new place.»
The president of the Federal Reserve, said at a press conference, after the statement, that the agency’s concern focuses on get «maximum employment and lower inflation»ensuring that «we will do everything we can to achieve the objectives.» While in previous meetings the risks focused more on prices, Powell now believes that these dangers have been distributed more between inflationary pressures and the weakness of the labor market, which is being «Clearly cooling» and that is «below the balance rate». Among the reasons, he prefers to look towards the descent of immigration that towards tariffs, at least for the moment. Thus, he warns that «You can’t say that the labor market is solid.»
It also focuses on “continuous” inflation, blaming tariffs implemented by the president, Donald Trump, although he no longer has his entire attention. «Since April, for me, The risks of higher and persistent inflation have probably been reduced a bitand that is partly due to the fact that the labor market has softened, and GDP growth has slowed down. «For the president of the agency, tariffs are raising the pressures on prices, but it seems more and more that it will be» an increase in prices at once, instead of creating an inflationary process. «
However, he pointed out that with this cut, They are «well positioned to react» In case it is necessary, in addition to being a measure to «manage risks and not weaken the labor market.»
Projection review
In turn, the members of the FOMC have updated their macroeconomic projections, after making it for the last time at the June meeting. They review GDP estimates, 1.6% this 2025, from 1.4% waiting in June. They leave their labor forecasts unchanged, maintaining the unemployment rate at 4.5%, but decreases those of 2026 to 4.4%.
As for inflation, they also keep the inflation perspectives without changes for this year, with the PCE in 3%, and 3.1% in their underlying fact. However, They raise the forecast for 2026raising both magnitudes of 2.4% to 2.6%.
He dot plotshows the possibility of two more type cuts for this yearat the October and December meetings. Of course, Powell predicts a more aggressive perspective for the types in 2026, since they only foresee another cut of types for next year, which is a slower pace than the current market price, which points to two or three cuts. Without a doubt, the well -known «Point Graph» of the Fed shows a great disparity of opinions for next year. And is that Jerome Powell himself
This at a meeting that, in case of little crumb, also received extra pressure after the recent political disputes that concern the body. And is that Donald Trump, in addition to having tried to force Powell in recent months to reduce the rates, requested the dismissal of Lisa Cook, one of the governors present in the vote. Process that, for the moment, the courts are dismissing.