US Fed FOMC Meeting HIGHLIGHTS: Federal Reserve gives first rate cut of 2025; US markets end mixed

US stocks closed mixed, with the Dow Jones Industrial Average settling 0.5% higher, while the S&P 500 dropped 0.1% and the tech-heavy Nasdaq Composite shed 0.3%.

The Russell 2000 Index advanced as much as 2.1% to 2,453.36 at 2:05 p.m. on Wednesday, surpassing the level for the all-time closing high for the first time since November 2021. A long-expected interest-rate cut from the Federal Reserve helped propel the Russell 2000 past its prior closing high.

Federal Reserve Chairman Jerome Powell said Wednesday the US central bank is undergoing a notable reduction in the ranks of those who work for the institution, according to a Reuters report.

Federal Reserve Chair Jerome Powell framed the central bank’s rate cut as a way to guard against rising risks in the labor market. “Yeah, I think you could think of this in a way as a risk management cut,” Powell told reporters during his post-decision press conference.

Federal Reserve Chair Jerome Powell emphasized the limits of the central bank’s economic projections on Wednesday, underscoring that policymakers remain data-dependent even as the Fed embarks on a new easing cycle. Powell, however, was quick to downplay the idea of a preset path.

“It’s an accumulation of the individual projections of 19 people,” Powell said. “We’re not on a preset path,Actual decisions will be based on the incoming data, the evolving outlook, and the balance of risks.”

That balance of risks, Powell noted, is unusually complex: “Ordinarily, when the labor market is weak, inflation is low. And when the labor market is really strong, that’s when you should be careful about inflation. We have a situation where we have two-sided risk. There’s no risk-free path.”

Powell warned that in a “healthier economy” displaced workers would be able to quickly find new opportunities, but today’s weak hiring rate raises the risk of unemployment rising more sharply. “That’s been a growing concern over the last few months,” he said.

The Federal Reserve’s latest FOMC statement outlines a quarter-point rate cut amid rising concerns over the labour market and persistent inflation. Chair Jerome Powell emphasised employment risks while signaling two more cuts in 2025. The decision reflects shifting priorities and political tensions, including Trump’s controversial attempt to remove Fed Governor Lisa Cook. Read the full FOMC statement for insights into the Fed’s economic outlook, rate projections, and its stance on inflation, growth, and independence.

Federal Reserve Chair Jerome Powell acknowledged growing cracks in the labor market on Friday, citing particular strain for young workers and recent graduates. “It’s an interesting labor market. And obviously we think it’s appropriate that we reduce our rates so that we become more neutral, which presumably will be better for the labor market,” Powell said. He pointed to those “on the margin” — recent grads, younger workers, and minorities — who are struggling to find jobs. “The overall job-finding rate is very, very low,” he said. “However, the layoff rate is also very low. So you’ve got a low firing, low hiring environment. And the concern is that if you start to see layoffs, the people who are laid off won’t… there won’t be a lot of hiring going on.”

Jerome Powell was asked repeatedly about persistent inflation and whether the Fed’s 2% target is achievable. “No one really knows where the economy will be in three years,” said Powell. However, the Fed chair reiterated that the base case is that tariff impacts will result in a one-time price jump and inflation should not remain persistent, especially given a weaker labor market.

The US Federal Reserve cut its benchmark interest rate by 0.25%, marking the first reduction since December, and signaled two more cuts in 2025. This move, aimed at supporting growth amid a weak job market and easing inflation, was widely anticipated. The Dow rose 155 points, while the S&P 500 and Nasdaq fell slightly.

The majority of the Federal Reserve now targeting two further rate cuts this year indicates that the doves on the committee are now in the driver’s seat, said Simon Dangoor, head of fixed income macro strategies at Goldman Sachs Asset Management.

It is really important that there was just one dissent in the Federal Reserve’s rate-cut decision, said David Kelly, chief global strategist at JPMorgan Asset Management. While Governors Christopher Waller and Michelle Bowman may each want the job of Federal Reserve chair, they weren’t willing to go against the consensus, he said in an interview with CNBC.

The Federal Reserve expects to cut short-term interest rates by another 0.5% this year, following a 0.25% reduction on Wednesday, according to its latest projections. However, internal disagreement is growing. The Fed’s “dot plot” shows varied views, with one policymaker favoring a year-end rate of 4.4%, while another—likely new Governor Stephen Miran—prefers 2.9%. Miran, recently appointed by President Donald Trump, dissented from the latest decision, advocating for a deeper cut. His appointment followed the resignation of Adriana Kugler and the contested firing of Lisa Cook, both Fed Governors. These moves have raised concerns that political pressure could push the Fed toward excessive rate cuts, risking inflation. Of the 19 policymakers, six oppose further cuts, two support one more, and nine favor two additional quarter-point reductions. The shift in sentiment stems from weaker job growth, rising unemployment, and limited inflation from Trump’s tariffs, prompting most officials to support easing despite lingering inflation fears.

After announcing their latest rate decision, officials shared their updated “dot plot”—a chart showing each member’s prediction for future rate changes. Most expect two more rate cuts before the year ends. But opinions vary widely.

One dot—possibly from Miran, who strongly supports lower rates—suggests a big drop of 1.25 percentage points. The chart doesn’t name anyone, but each dot represents one person’s view.

Out of 19 members:

– 10 expect two more cuts, likely in October and December

– 9 expect just one more cut

– 1 doesn’t want any cuts at all, not even the one just made

Governors Michelle Bowman and Christopher Waller, who were expected to possibly oppose, both supported the 25 basis point cut. Both were appointed by former President Donald Trump, who has repeatedly urged the Fed to not only make the usual quarter-point rate cuts but to reduce the federal funds rate swiftly and boldly.

Trump’s newly installed Governor Stephen Miran was the only one of those voting against the quarter-point move, instead advocating for a half-point cut.

BIG BREAKING | On Wednesday, the Federal Reserve approved a widely expected rate cut and indicated that two additional cuts may come before year-end amid growing concerns about the U.S. labor market. In an 11-to-1 vote, with less dissent than Wall Street anticipated, the Federal Open Market Committee lowered its benchmark overnight lending rate by a quarter percentage point, setting the target range between 4% and 4.25%.

Watch live: https://www.youtube.com/live/Y2cPB_Hbo70?si=Jv9XEtyJxHQwOcjI

The 10-year Treasury yield traded at 4.045%, up nearly 2 basis points. The rate on the 2-year Treasury was last up 3 basis points at 3.541%.

Crypto bull Eric Trump says a Federal Reserve rate cut — which his father, President Trump, has been clamoring for — could give crypto prices a big boost. “I just think you would potentially see this thing skyrocket,” Trump told Yahoo Finance, adding that because of crypto’s seasonality, there is particular room for growth in the fourth quarter. His crypto miner, American Bitcoin (ABTC), also backed by brother Donald Trump Jr., debuted on the Nasdaq in early September after a merger with Gryphon Digital Mining. Trump added that lower borrowing costs would free up cash for riskier bets. Fed Chair Jerome Powell is widely expected to lower rates by 25 basis points on Wednesday, though the path for additional cuts remains unclear.

British stocks rose on Wednesday, recovering from the previous session’s losses, as investors waited for the U.S. Federal Reserve’s policy decision later in the day. The benchmark FTSE 100 gained 0.14%, while the domestically focused FTSE 250 advanced 0.6%.

US stocks diverged on Wednesday in the countdown to the end of Federal Reserve’s policy meeting, overwhelmingly expected to usher in the first US interest rate cut of 2025. The Dow Jones Industrial Average moved up nearly 0.7%, while the S&P 500 nudged down 0.1%, Meanwhile, the tech-heavy Nasdaq Composite fell over 0.5%.

The US Federal Reserve’s “dot plot” is one of the most closely watched charts in global markets, providing a snapshot of policymakers’ expectations for future interest rates. The chart is published quarterly as part of the central bank’s Summary of Economic Projections (SEP).

US Treasury Secretary Scott Bessent previously agreed to occupy two different houses at the same time as his “principal residence,” Bloomberg News reported, an agreement similar to one President Donald Trump has called mortgage fraud in his unprecedented bid to fire Federal Reserve Governor Lisa Cook. Source: Reuters

Tensions between US President Donald Trump and the Federal Reserve have dominated headlines in recent months and before the central bank’s key policy decision tonight. On August 1, Trump blasted Fed Chair Jerome Powell on Truth Social, calling him “stubborn” for keeping rates steady despite easing inflation. He went further, urging the Fed’s board of governors to seize control of interest rate decisions if Powell doesn’t “substantially” cut borrowing costs. The Fed has so far held rates at 4.33% this year, citing tariff-driven inflation risks. With inflation at 2.6%, markets await Powell’s remarks for clues on the easing path ahead.

Matthew Luzzetti, chief US economist for Deutsche Bank, said a path for more rate cuts would likely be driven by “risk management considerations,” with greater downside risks to the labor market and more limited upside risks to inflation. Luzzetti expects three cuts in total this year, with little change to Fed officials’ economic outlook for slow growth, higher inflation, and modestly higher unemployment.

The last dot plot, released in June, revealed a consensus among Fed officials for two cuts this year amid uncertainties about how the Trump administration’s policies on tariffs, immigration, and taxes would impact the economy.

The US Federal Reserve is expected to announce its first interest rate decision of 2025 later tonight, Wednesday, September 17, following the two-day meeting of the Federal Open Market Committee (FOMC).

Stocks could take a hit if the US Federal Reserve turns out to be less friendly to rate cuts than investors expect, according to Subadra Rajappa, head of US rates at Societe Generale. Speaking on CNBC’s Fast Money on Tuesday, she said markets may “unwind” if traders realise the Fed won’t cut rates as aggressively as they’re hoping. The Fed is set to give more clarity on its plans this week when it publishes its “dot plot” — a chart showing where policymakers see interest rates heading in the future.

At its July meeting, Federal Reserve Chair Jerome Powell signalled that future policy decisions would depend heavily on the state of the labour market. Since then, data has shown clear signs of weakening. Hiring has slowed, unemployment claims have risen, and the overall jobless rate has edged higher.

These developments have reinforced expectations that the Fed will cut its benchmark interest rate by a quarter point. Investors believe easing policy could help cushion the economy against labour market stress and sustain growth momentum.

US stocks were mixed on Wednesday as investors awaited the Federal Reserve’s closely watched policy decision and, more importantly, its outlook for the path of interest rates.

The S&P 500 slipped 0.1%, while the Nasdaq Composite lost 0.4%. The Dow Jones Industrial Average bucked the trend, adding 254 points, or 0.5%, to close higher.