WASHINGTON: On Wednesday, the US Federal Reserve cut interest rates for the first time this year, citing slower job growth and employment risks as policymakers encounter increased pressure from President Donald Trump.
The Fed lowered the benchmark interest rate by 25 basis points, setting it between 4.0 percent and 4.25 percent, and indicated two more possible reductions this year.
Fed Chair Jerome Powell emphasized that the central bank is “strongly committed” to preserving its independence from political influence, when questioned about the recent inclusion of a key advisor to Trump in its team this week.
He stated that the Fed was “correct to observe how tariffs, inflation, and the labor market developed” before reducing rates for the first time in nine months.
The sole vote against the decision came from new Fed Governor Stephen Miran, who previously worked in the Trump administration. He preferred a more substantial rate cut of 50 basis points.
The remaining 11 voting members of the rate-setting Federal Open Market Committee (FOMC) endorsed the quarter-point reduction.
This was the initial rate meeting with Miran, who had been leading the White House Council of Economic Advisers. He took the oath of office right before the two-day meeting commenced on Tuesday, following a quick Senate approval on Monday evening.
The Fed encounters conflicting pressures in modifying rates, as Trump’s extensive tariffs heighten inflation risks while the employment market declines.
The Fed usually maintains elevated rates to control inflation, but may cut rates to bolster the labor market as well.
On Wednesday, the Fed raised its 2025 growth outlook to 1.6 percent from June’s 1.4 percent estimate, while keeping unemployment and inflation forecasts unchanged.
This year, Trump has increased pressure on the Fed, consistently urging significant rate reductions and criticizing Powell.
