US Federal Reserve cuts key interest rate for first time in 2025

Dubai: The US Federal Reserve cut its benchmark interest rate by 25 basis points for the first time in 2025, while penciling in two more cuts this year, in a move to backstop a faltering jobs market.

In its statement, the Federal Open Market Committee (FOMC) voted to cut the central bank's target range for benchmark rate to 4% to 4.25%, in line with market expectations of a quarter-point cut.

Ahead of the Fed decision, traders and analysts anticipated at least one half-point interest-rate cut across this year's three remaining policy meetings.

Meanwhile, the Central Bank of the UAE (CBUAE) too decided Wednesday to lower key interest rate by 25 basis points to 4.15 per cent, mirroring the Fed decision.

Competing pressures

The US central bank is balancing competing pressures as Trump’s tariffs drive inflation risks while the labor market shows signs of weakening.

Typically, the Fed keeps rates elevated to curb inflation toward its 2% target but could cut rates to support jobs.

On Wednesday, it raised its 2025 growth forecast to 1.6% from June’s 1.4% projection, keeping unemployment and inflation forecasts unchanged. Meanwhile, Trump has continued pressing the Fed this year for rate reductions.