Breaking: Fed cuts interest rates, first time in 2025

The Federal Reserve lowered its benchmark interest rate by a quarter percentage point, the first cut of the year and a shift after nine months of holding policy steady. The decision by the Federal Open Market Committee moves the federal funds rate to a target range of 4.00% to 4.25%.

The move expected following signs of a cooling labor market, with job creation flattening and government revisions showing nearly a million fewer positions added last year than previously reported. Markets may anticipate additional reductions in the months ahead, with futures pricing in another cut in December and a possible move as early as October.

Stocks saw a modest uptick in the immediate aftermath of the announcement. The Dow Jones Industrial Average rose about 0.56%, while the S&P 500 was little changed and the Nasdaq slipped 0.2% before stabilizing. The US dollar briefly dropped to a four-year low against the euro before recovering, and Treasury yields fell as investors factored in the likelihood of looser monetary policy.

Lower rates may reduce borrowing costs across the economy, from mortgages and auto loans to credit cards, potentially giving consumers and businesses more breathing room. Yet persistent inflation pressures and renewed tariff concerns under the Trump administration may limit the effectiveness of rate cuts in stimulating growth.

How aggressive will the Fed be in the months ahead? Forecasts range between two and three cuts in 2025. The central bank’s next policy meeting is scheduled for late October, when officials are expected to provide further information on the path of monetary policy.