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The Federal Reserve reduced interest rates for the first time since December 2024, amid the risk of rising unemployment, and announced more cuts would follow in response to the declining labor market.
Interest rates decreased by a quarter of a percentage point, from the 4.00%-4.25% range.
“There are no risk-free paths…it’s not incredibly obvious what to do,” says Jerome Powell, Federal Reserve chair. “We have to keep our eye on inflation at the same time, we cannot ignore…maximum employment.”
The decision to cut rates follows a direction called for by President Donald Trump, but fails to address the significant cuts in borrowing costs he has demanded.
“You see minority unemployment going up. You see younger people…more susceptible to economic cycles…in addition to just overall lower payroll job creation that shows you that at the margin, the labor market is weakening. We don’t need it to soften anymore,” Powell says.
