UPDATE

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

Policymakers voted to cut target range for benchmark rate to 4.00% to 4.25%

Last updated:
Justin Varghese, Your Money Editor
1 MIN READ
Fed Chair Jerome Powell.
Fed Chair Jerome Powell.
AP

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.

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.

Justin Varghese
Justin VargheseYour Money Editor
Justin is a personal finance author and seasoned business journalist with over a decade of experience. He makes it his mission to break down complex financial topics and make them clear, relatable, and relevant—helping everyday readers navigate today’s economy with confidence. Before returning to his Middle Eastern roots, where he was born and raised, Justin worked as a Business Correspondent at Reuters, reporting on equities and economic trends across both the Middle East and Asia-Pacific regions.
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