US Fed Cuts Rates by 25bps, Points to Weak Labor Market
The US Federal Reserve has made its first interest rate cut of FY-2025. The Fed reduced rates by 25 basis points (bps), bringing the federal funds rate down to 4.00%–4.25%.
In its policy statement, the Fed said that the labor market is losing strength. Job gains have slowed, and the unemployment rate has moved up slightly, although it is still at a low level. The central bank also noted that inflation has picked up and remains higher than the target.
Most members of the Federal Open Market Committee (FOMC) supported the 25 bps cut. However, one Fed governor argued for a bigger 50 bps cut, saying a stronger move might help the slowing economy.
This step was widely expected by traders and analysts. Many in the forex market and stock market had already predicted that the Fed would cut rates and point to labor market weakness as the main reason.
The Fed also suggested that more rate cuts could come later in 2025, but decisions will depend on how the economy, jobs, and inflation perform in the next few months.
Markets reacted with mixed feelings. Some investors saw the move as support for growth, while others worried it might be a signal of deeper problems in the economy.
Impact:
The rate cut might make loans cheaper and support growth. More cuts could possibly follow if the labor market stays weak and inflation does not ease.
