For the first time this year, the Federal Reserve has cut interest rates. Additional cuts are expected by the end of the year.
Federal Reserve Chairman Jerome Powell announced a cut of 25 basis points on Wednesday at the conclusion of the Federal Open Market Committee meeting. With the cut, the new federal target rate is 4 to 4.25 percent.
It was the first rate cut since December 2024. Powell pointed to a softening labor market, leading to the cut, even as inflation has risen slightly in the past two months. The Bureau of Labor Statistics recently made a revision to its employment numbers from April 2024 to March 2025, showing the economy added approximately 900,000 fewer jobs than originally reported. The September numbers showed the economy only added 22,000 jobs, with unemployment at 4.3 percent.
Powell said he could no longer say labor market and job creation were strong, pointing to the revisions to the spring jobs numbers.
The annual inflation rate is at 2.9 percent.
“Higher tariffs have pushed up some prices in some categories of goods, but their overall effect on economic activity and inflation remains to be seen,” Powell said. “A reasonable base case is that the effects on inflation will be relatively short-lived, a one-time shift in the price level. But, it is also possible that the inflationary effects could instead be more persistent and that is a risk to be assessed and managed. Our obligation is to ensure that a one-time increase in the price level does not become an ongoing inflation problem.”
During the meeting, FOMC members gave their projections on interest rates. The consensus was for rates to fall to 3.6 percent by the end of this year, 3.4 in 2026, and 3.1 in 2027.
“This path is one-quarter percent lower than projected in June. As is always the case, these individual forecasts are subject to uncertainty, and they’re not a committee plan or decision. Policy is not on a preset course,” Powell said.
Auto rates remain high. According to Cox Automotive data, used vehicle loan rates have increased by 22 basis points in September to 14.15 percent.
