News You Can Use: Fed Cuts Rates by .25%

On September 17, 2025, the Federal Open Market Committee (FOMC) voted to cut interest rates by 0.25%. This quarter-point reduction was widely anticipated, and the market's reaction has been fairly muted following the announcement.

The vote passed 11–1, with the lone dissenter, Stephen Miran, favoring a larger 0.50% cut. His stance is notable not only because of the size of the reduction he favored, but also because Miran is the first Federal Reserve Governor to simultaneously serve as an employee in the Trump administration and hold a seat as a voting member of the Fed. This dual position suggests that his future votes may lean toward more aggressive easing in interest rates, in lockstep with the administration's preferences.

What did surprise markets slightly was the updated forward guidance. Instead of signaling just one more 0.25% reduction this year, the Fed now expects to cut rates twice more, or 0.50% in total, by year-end. If realized, this would bring this year's cumulative reductions to 0.75%. The Fed maintains that future decisions will be influenced by economic conditions.

In his remarks, Chair Jerome Powell emphasized that the decision reflected a shift in the “balance of risks.” In plain terms, the Fed now sees the danger of rising unemployment as outweighing the risk that inflation could move significantly higher than its 2% target. The Fed is in a tough spot, to be sure.

The longer-term stock market impact remains to be seen, but this move is expected to modestly lower borrowing costs, likely benefiting homebuyers and auto purchasers, and it should cause a decline in rates on short-term bonds, CD's and cash-equivalent investments.

Tyler Breder, CFP®