Federal Reserve approves quarter-point interest rate cut and sees two more coming this year

WASHINGTON – The Federal Reserve on Wednesday approved a widely anticipated rate cut and signaled that two more are on the way before the end of the year as concerns intensified over the U.S. labor market even as inflation is still in the air.

In an 11-to-1 vote signaling less dissent than Wall Street had anticipated, the Federal Open Market Committee lowered its benchmark overnight lending rate by a quarter percentage point. The decision puts the overnight funds rate in a range between 4.00%-4.25%.

Newly installed Governor Stephen Miran was the only policymaker voting against the quarter-point move, instead advocating for a half-point cut.

Governors Michelle Bowman and Christopher Waller, looked at for possible additional dissents, both voted for the 25 basis point reduction. All were appointed by President Donald Trump, who has badgered the Fed all summer to cut not merely in its traditional quarter-point moves but to lower the fed funds rate quickly and aggressively.

In the post-meeting statement, the committee again characterized economic activity as having “moderated” but added language saying that “job gains have slowed” and noted that inflation “has moved up and remains somewhat elevated.” Lower job growth and higher inflation are in conflict with the Fed’s twin goals of stable prices and full employment.

“Uncertainty about the economic outlook remains elevated” the Fed statement said. “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”

Stocks were volatile after the decision was released, with major averages mixed after Chair Jerome Powell characterized the cut as “risk management” rather than something more directed at shoring up a weak economy. Treasury yields also were mixed, falling on short-duration issues but up otherwise.

This meeting was one where the folks at the Fed publish their quarterly Summary of Economic Projections. This includes outlooks for GDP, inflation, and the labor market for the rest of the year and the years ahead.

Forget for a moment that these projections are almost always wrong. Wall Street cares anyway for the insight it provides into future Fed policy.

This time, the Fed members are projecting 1.6% GDP growth for 2025, a 4.5% unemployment rate (higher than it is now), and 3% inflation (which Powell said can still be influenced by tariffs). All the while, they’re saying to expect additional rate cuts by year-end.

Today’s move is “a risk-management cut,” Powell said, while acknowledging it’s not “obvious” what to do with policy. But clearly, the labor market is what Powell and enough other Fed members think should be addressed.

So, put this together, and the Fed expects to cut rates because of a weakening labor market... yet even while inflation remains “hot” and above its supposed 2% target. Our “higher prices” radar is going off right now, but so is the outlook for the economy in general.

And for those interested....

The “fired” (note the quotes) Governor Lisa D. Cook did vote in today’s Federal Reserve interest rate meeting held on September 17, 2025. She was part of the 11–1 majority that approved a 0.25 percentage point rate cut, lowering the federal funds rate to a range of 4.00%–4.25%.

Surprisingly, The lone dissenting vote came from newly appointed Governor Stephen Miran, who advocated for a larger 0.50 percentage point cut.

In July, Trump said the Fed was “choking out the housing market” by keeping rates too high. And in a post on Truth Social in August, he wrote that “people can’t get a Mortgage” because of Powell.

And he’s right... When the Fed started to raise interest rates in 2022, the average 30-year-fixed mortgage rate moved higher as well. It reached a 23-year high near 8% in 2023.

Let’s do some back-of-the-envelope math. Today, the median U.S. home price is $443,867. We’ll round down and say we’re buying a house for $400,000.

Assuming a 20% down payment, our loan amount would be around $320,000. The lowest 30-year mortgage rate on Bankrate.com is 5.57% right now. We’d end up with a monthly payment of $1,831.

But let’s say the mortgage rate jumped a single percentage point to 6.57%... That would add more than $200 to the monthly payment.

The higher that rates rise, the worse the sticker shock becomes.

As a result, folks are either struggling to afford new mortgages or even repay their current loans. Data from Google Trends shows that folks have recently been searching for “help with mortgage” at the highest rate since 2008.

When the Fed cuts rates, mortgage rates typically come down. And that makes housing more affordable by bringing down the monthly payment.

Now, this doesn’t always happen. Last September, when the central bank began lowering its fed-funds rate by 50 basis points, mortgage rates actually rose. Mortgage rates most directly track longer-term Treasury yields, which took off as inflation expectations grew.

Lately, though, mortgage rates have been moving lower. That may be a signal that the market has gotten less worried about inflation and believes the Fed is doing the “right” thing by lowering rates amid a weakening labor market.

Just this morning, the Mortgage Bankers Association announced that the average 30-year fixed mortgage rate has fallen to 6.39%. That’s its lowest level since last October.

Cutting rates from here, as the Fed is now suggesting it will do, should put even more downward pressure on mortgage rates.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.