US Federal Reserve cuts rates by 25 bps after nine-month pause, signals further easing this year
The move came after a nine-months and mounting pressure from President Donald Trump. The run-up to the decision was also marked by political drama, with Trump attempting -- unsuccessfully so far -- to remove Governor Lisa Cook from the Fed board. Before the meeting Trump aide Stephen Miran was sworn in as the new Fed Governor.
New Delhi: The US Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday, lowering the policy range to 4.0–4.25 per cent in its first reduction since December 2024. They also signalled the possibility of two more cuts later this year, likely in November and December.
The move came after a nine-months and mounting pressure from President Donald Trump. The run-up to the decision was also marked by political drama, with Trump attempting -- unsuccessfully so far -- to remove Governor Lisa Cook from the Fed board. Before the meeting Trump aide Stephen Miran was sworn in as the new Fed Governor.
Further cuts possible this year
Fed Chair Jerome Powell said further reductions of 25 basis points could take place at the two remaining meetings this year. This would mean an overall easing of 75 basis points in 2025. "There are no risk-free paths. It's not incredibly obvious what to do," Powell told reporters, adding, "We have to keep our eye on inflation at the same time, we cannot ignore, maximum employment."
Pointing to signs of a weakening labour market, Powell added that rising minority unemployment, increased vulnerability among younger workers, and slowing payroll growth. "You see minority unemployment going up. You see younger people … more susceptible to economic cycles … in addition to just overall lower payroll job creation that shows you that at the margin, the labour market is weakening. … We don't need it to soften anymore," he added.
The Fed had last cut rates by a full percentage point across three meetings in 2024 before holding steady until now.
Mixed reactions in US markets
There were mixed reactions in the markets. The Dow Jones Industrial Average gained 260 points, or 0.57 per cent, to close at 46,018.32. The Nasdaq Composite dropped 73 points to 22,261.33, while the S&P 500 fell nearly 1 per cent to 6,600.35.
In commodities, gold futures on COMEX slipped $22.20 to $3,695.60 per ounce, though spot gold inched up $4.35 to $3,664.25. Silver was largely flat, with COMEX futures down 0.24 per cent at $42.05 per ounce and spot silver up 0.16 per cent at $41.74.