LiveUpdated Sept. 17, 2025, 3:52 p.m. ETThe Federal Reserve lowered rates by a quarter point, but Stephen Miran, a Trump appointee who joined the board this week, voted for a bigger cut. Balancing persistent inflation and a weaker labor market was “a challenging situation,” Fed Chair Jerome Powell said. PinnedUpdated Sept. 17, 2025, 3:46 p.m. ETThe Federal Reserve lowered interest rates by a quarter of a percentage point on Wednesday as officials signaled that two more cuts could follow this year in light of rising risks confronting the labor market.The decision to lower borrowing costs for the first time since December shifts interest rates to a range of 4 percent to 4.25 percent. The decision was not unanimously supported, the second straight meeting that featured at least one dissent from a member of the Board of Governors.Stephen Miran, President Trump’s pick to join the Fed who was sworn in just minutes before the start of the central bank’s two-day meeting on Tuesday, voted in favor of a half-point reduction.The decision to cut marks a turning point for the central bank, whose officials have been locked in an intense debate about the right time to provide some relief to borrowers when its goals of low, stable inflation and a healthy labor market are in tension with one another.Inflation picked back up over the summer and appears poised to continue accelerating this year as a result of Mr. Trump’s tariffs. The labor market, while still solid, has started to flash more ominous signs.Jobs growth has sharply slowed, with monthly gains averaging just 29,000 over the three-month period ended in August. In May, the average stood around 130,000 positions. While consumers are still spending and the unemployment rate remains stable at 4.3 percent, sluggish hiring has raised concerns that the labor market is now much more vulnerable than earlier in the year.In its policy statement, the Fed acknowledged that its views on the labor market had changed, saying that policymakers now judge that the “downside risks to employment have risen.”Against this backdrop, new projections released on Wednesday showed that most officials expect another half a percentage point reduction in interest rates this year, which would bring borrowing costs to a range of 3.5 percent to 3.75 percent. There are two more meetings left this year, scheduled for October and December. That is a more substantive decline than what officials estimated in June. Still, seven of the 19 policymakers penciled in fewer cuts this year, suggesting the forthcoming decisions could be divisive.The dot plot tracking individual officials’ views on interest rates had two notable entries for 2025. In what is considered a “soft dissent,” one policymaker signaled support for interest rates to have stayed at the previous level of 4.25 percent to 4.5 percent this year. On the other extreme, one policymaker penciled in a steep drop in interest rates by the end of the year to a range of 2.75 percent to 3 percent. While the forecasts are anonymous, that is likely to have been Mr. Miran’s estimate.By the end of 2026, most officials expected interest rates to decline another quarter of a percentage point, to a range of 3.25 percent to 3.5 percent. Through the end of 2028, they expected interest rates to remain just above 3 percent. Officials maintained that over a longer time horizon, the so-called neutral rate, which neither speeds up nor slows down demand, had steadied at 3 percent.Wednesday’s projections also showed that most officials expect the economy to grow 1.6 percent this year, slightly higher than June’s estimate. They also predict unemployment to rise to 4.5 percent, matching their estimates of three months ago.Officials simultaneously held their year-end forecast for “core” inflation, which strips out volatile food and energy prices and is seen as the most accurate gauge of underlying price pressures, at 3.1 percent, but raised their expectations for 2026 compared to June’s forecast. Now, they expect core inflation to settle at 2.6 percent by the end of next year. Only in 2028 do they have inflation returning to the Fed’s 2 percent target.The Fed is having to balance competing economic risks and difficult policy debates while contending with a relentless pressure campaign from Mr. Trump and his allies to slash borrowing costs. These dynamics have made for a highly unusual Fed meeting.Mr. Miran, who most recently served as chair of the Council of Economic Advisers, was approved by the Senate to join the Fed only the night before the meeting began, reflecting the president’s desire to have him in place in time to vote on interest rates. In an unorthodox arrangement, Mr. Miran has said he would take only a temporary leave of absence from his White House role while serving as a Fed governor.Another governor, Lisa Cook, spent the day before the meeting defending her right to participate after taking Mr. Trump to court for trying to fire her.The attempted ousting, which has no historical precedent, has kicked off an intense legal battle that will have far-reaching consequences for the institution and its ability to set interest rates free from political meddling. Late on Monday, a panel of judges ruled 2-1 that Ms. Cook could stay on as a governor while her lawsuit contesting her firing is litigated. The White House is expected to soon appeal the ruling to the Supreme Court.The Fed has been careful about how it has handled Mr. Trump’s attacks, a cautious approach that is now being scrutinized as the institution’s independence comes under its most extreme threat in decades.The Fed has said it would abide by any court decision in Ms. Cook’s case.Updated Sept. 17, 2025, 3:46 p.m. ETSept. 17, 2025, 3:41 p.m. ETJobs versus inflation: The Federal Reserve’s quarter-point interest rate cut comes after a long hiatus and marks a turning point for the central bank, where officials appear to be increasingly focused on the labor market rather than inflation. The latest projections suggest the Fed will cut interest rates at its remaining two meetings of the year, even though Jerome H. Powell, the Fed chair, said the central bank will be making its decisions “meeting by meeting.”Responding to risks: Mr. Powell described the rate decision as a “risk management” move, suggesting that it is about shoring up the economy rather than responding to an economic downturn that has already taken root. That view materialized in new projections released alongside the rate decision, which showed that officials expect economic growth to be slightly higher this year and next compared with three months ago. He also made clear that there was not much support for a half-point cut today, which he said was reserved for moments when the Fed’s policy settings were “out of place.”Internal divisions: Mr. Powell faced a lot of questions about divisions within the top ranks of the central bank over which economic risks to pay most attention to and how to set interest rates to best address them. September’s vote was the second meeting in a row that was not unanimously supported. Seven of the 19 policymakers penciled in fewer cuts this year in the latest projections, suggesting the forthcoming decisions could be divisive. Mr. Powell summed up the challenge succinctly: “There are no risk-free paths now. It’s not incredibly obvious what to do.”A new governor: Mr. Powell repeatedly dodged questions related to Stephen Miran, Lisa Cook and the administration’s broader efforts to pressure the central bank. He downplayed Mr. Miran’s influence at the central bank, given he is just one of 19 policymakers involved in the policy debates. He declined to comment directly on Ms. Cook’s lawsuit against the president. Asked directly about independence, Mr. Powell said the Fed was “strongly committed” to defending it.Sept. 17, 2025, 3:40 p.m. ETAfter some modest moves higher and lower, stock and bond markets are heading into the end of the day roughly where they started it. The S&P 500 dipped as much as 0.8 percent but is now trading flat for the day. Treasury yields have nudged higher but only by a few hundredths of a percentage point.Sept. 17, 2025, 3:24 p.m. ETPowell’s final question was whether the debate over Fed independence is putting pressuring on inflation expectations. He says the market is not factoring in those concerns right now in terms of setting interest rates. He added that surveys have showed that longer-term inflation expectations have been “rock solid” in terms of running at 2 percent over the longer rur, but added, “We don’t take that for granted.”Sept. 17, 2025, 3:23 p.m. ETPowell has wrapped up his news conference. We will have takeaways shortly.Sept. 17, 2025, 3:22 p.m. ETPowell takes a final question on inflation expectations and says that the Fed does not take for granted the fact that those measures have consistently showed the central bank over time getting inflation back to its 2 percent target.Sept. 17, 2025, 3:21 p.m. ETPeople at the lower end of the income spectrum are under pressure, Powell said, but overall, households are in good shape, as are banks.Sept. 17, 2025, 3:21 p.m. ETAsked about the housing market, Powell says that high rates have burdened the industry, and that lower rates would raise demand, lower borrowing rates and help builders. But he says the sector also faces a deeper problem of a nationwide housing shortage. This has been a primary complaint by the Trump administration about higher interest rates, that they have frozen U.S. home buying.Sept. 17, 2025, 3:21 p.m. ETPowell says they are watching consumer default rates ticking up, but that they’re not at a level that is “terribly concerning.” Lower rates should help support economic activity, he said.Sept. 17, 2025, 3:21 p.m. ET“Forecasting is very difficult even in placid times,” Powell says. “I think right now is a particularly challenging time, even more uncertain than usual.”Sept. 17, 2025, 3:12 p.m. ET“That downside risk is now a reality and clearly there is more downside risk,” Powell says about the labor market. In addition to data showing that employers added only 22,000 jobs in August, revisions in July shaved 258,000 jobs from what was initially reported. The picture that is emerging is a labor market that is much weaker than economists had thought it was.Sept. 17, 2025, 3:12 p.m. ET“There are no risk-free paths now. It’s not incredibly obvious what to do,” Powell says.Sept. 17, 2025, 3:10 p.m. ETPowell has been asked numerous times about the degree of division within the Fed. His overarching point is that disagreement is actually healthy at a point in which the economic signals are so mixed. He said it would be unusual if there was a high degree of agreement.Sept. 17, 2025, 3:10 p.m. ETPowell is asked about a Gallup poll showing that Americans now have more confidence in the Fed to do what’s right for the economy than the president. “We’re not going to get distracted by anything,” he says, adding “we’re just going to keep doing our jobs.”Sept. 17, 2025, 3:07 p.m. ETPowell discounts a main argument of the Trump administration: That foreign countries are paying the tariffs. Tariffs are mostly being paid by the companies that that sit between the exporter and the consumer, rather than exporters, he said. The pass through to consumers has been smaller and slower than expected, but “it’s very clear” that there is some, he says, and companies say “they have every intention of passing that through in time.”Sept. 17, 2025, 3:07 p.m. ETAgain, Chair Powell has mostly avoided a question about Stephen Miran and his ongoing ties to the White House. “The only way for any voter to really move things around is to be incredibly persuasive,” Powell said. “That’s how it’s going to work.”Sept. 17, 2025, 3:07 p.m. ETPowell says companies are passing on higher costs from tariffs to consumers but it’s been smaller and slower than expected. It’s true that companies have in many cases tried to absorb the higher levies but some, especially smaller businesses, are now running out of room to do so.Sept. 17, 2025, 3:05 p.m. ETPowell says that tariffs are largely being paid by the importers, not exporters from other countries. He says it’s clear that there has been some pass-through to consumers but that it has been relatively small so far.Sept. 17, 2025, 3:04 p.m. ETThere is “great uncertainty” about whether artificial intelligence is affecting the labor market, Powell says. There have been questions about whether companies will hire fewer people, or lay off existing employees, because A.I. can do the work that was previously done by humans. “It’s probably a factor” in the labor market slowing, he says, but adds that it’s hard to tell how big the effect is.Sept. 17, 2025, 3:04 p.m. ETPowell has steered clear from touching on any of the political issues facing the Fed. He has sidestepped a question on Bessent’s recommendations; dodged an inquiry about the president attempt to fire Cook, a fellow Fed governor; and avoided engaging directly on the matter of the central bank and its political independence.Sept. 17, 2025, 3:03 p.m. ETPowell declines to comment on Treasury Secretary Scott Bessent’s call for an independent review of the Fed. He adds that there is already work underway to evaluate the size of the Fed. “We’re certainly open to constructive criticism,” Powell added.Sept. 17, 2025, 3:02 p.m. ETPowell said the biggest issue around economic data at the moment is low response rates to surveys. This is a problem that is happening all over, he said, adding that organizations such as the Bureau of Labor Statistics, need significant resources to drive higher response rates.I’m based in London and in Britain this is a huge problem for the nation’s statistics agency. It has deeply shaken faith in the labor market statistics.Sept. 17, 2025, 3:01 p.m. ET“We see that the labor market is softening and we don’t need it to soften any more, don’t want it to, so we use our tools,” Powell says.Sept. 17, 2025, 3:01 p.m. ETPowell says a quarter point cut in itself won’t “make a huge difference to the economy,” but that the whole path of rates will influence expectations, which will influence the market in turn. It starts with a 25 basis point rate cut, but the market’s also pricing in a rate path, he said. “I’m not blessing what the market’s doing at all. I’m just saying it’s not just one action.”