September FOMC: A "Risk Management" Cut

Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4‑1/4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. FOMC STATEMENT COMPARE: pic.twitter.com/6gTcajtaKz One dissenter: Voting against this action was Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting. FED SAYS DOWNSIDE RISKS TO EMPLOYMENT HAVE RISEN

In conjunction with the Federal Open Market Committee (FOMC) meeting held on September 16–17, 2025, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2025 to 2028 and over the longer run. Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections represent each participant’s assessment of the value to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. “Appropriate monetary policy” is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability *FED’S MEDIAN RATE FORECAST END-’28 AT 3.1% *FED’S MEDIAN RATE FORECAST END-’26 AT 3.4%; PREV. 3.6% *FED’S MEDIAN RATE FORECAST END-’27 AT 3.1%; PREV. 3.4% *FED’S MEDIAN RATE FORECAST END-’25 AT 3.6%; PREV. 3.9% *FED’S MEDIAN RATE FORECAST LONGER-RUN AT 3%; PREV. 3.0% Dot plot forecasting two more rate cuts this year. The #Fed decreased the fed funds rate by 25bps as expected. In the dot plot, a majority of policymakers see 2 cuts in 2025. pic.twitter.com/Hn1tr3OT5i MORE FOMC: DOT PLOT SHOWS ONE PARTICIPANT WANTED FIVE MORE RATE CUTS THIS YEAR, PRESUMED TO BE MIRAN; UNCERTAINTY 'REMAINS ELEVATED' #FOMC #FederalReserve #economy

As expected, the FOMC cut policy rates by 25 bps, with the fed funds target range at 4.00%-to-4.25%. This restarts the rate cut campaign which had been on hold since December (after a total of 100 bps in the final four months of last year). The Fed was waiting to see how the Administration’s economic policies unfolded (particularly on tariffs) along with ...