Fed Cuts Rate By 25 Basis Points

The Federal Reserve on Wednesday cut the key borrowing rate by 25 basis points, bringing down the federal funds rate to the 4% to 4.25% range, in line with market expectations.

This is the first rate cut announced by the Fed in 2025. The rate reduction comes at a time when inflation hasn’t shown any signs of a significant rise. On Tuesday, President Donald Trump stated that while the Fed should be independent, it should also listen to “smart people” like himself.

The Federal Open Market Committee (FOMC) highlighted the moderation in economic activity. It also touched upon the weakness in the labor market, stating that “job gains have slowed” while noting that inflation remains “elevated.”

“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 FOMC said.

The Committee voted 11-to-1 to cut rates by 25 bps, with President Trump’s pick and newly-confirmed Governor, Stephen Miran, voting for a 50 bps cut. According to the dot plot projections, one of the votes was in favor of a 125 bps cut this year. Overall, nine of the 19 participants favored one additional cut, while 10 voted in favor of two cuts.

Earlier, President Trump called on Fed Chair Jerome Powell to be open to feedback and to listen to him. “If you look, all the economists got it wrong, I got it right along with some other people out of a hundred. So they should listen to people that are smart, there’s nothing wrong with that, but they have to make their own choice. But they should listen,” Trump told reporters at the White House.

Meanwhile, U.S. equities edged lower in Wednesday’s midday trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.07%, while the Invesco QQQ Trust (QQQ) fell 0.48%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.13% at the time of writing.

Also See: Mortgage Refinancing Demand Sees A Sharp Increase As Interest Rates Drop: Report

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