On Wednesday, the Federal Reserve of the United States announced an interest rate cut, marking the first reduction since December. The new rate is set between 4% and 4.25%, the lowest level since November 2022. The decision comes as the labor market shows signs of instability, despite ongoing tariffs imposed by the Trump administration that have been contributing to rising prices.
Federal Reserve Chair Jerome Powell noted that job growth has decelerated and the risks of higher unemployment have increased. He also indicated that inflation is on the rise, suggesting that the tariffs could lead to a “one-time shift” in price levels. However, he acknowledged the possibility that inflation could become a more persistent issue, which could complicate efforts to manage economic stability.
In a related political development, President Trump attempted to remove Fed governor Lisa Cook, accusing her of mortgage fraud. Cook has denied these allegations and asserted that the president lacks the authority to dismiss her. A federal judge has ruled against Trump in this matter, although the White House has appealed to the Supreme Court.
Furthermore, in August, Fed governor Adriana Kugler, who was appointed by President Biden, resigned from her position. Subsequently, the Senate confirmed Stephen Miran, the current chair of the Council of Economic Advisors, to take her place. Miran was the sole member of the Board to dissent from the recent rate cut decision, advocating for a larger reduction.
Economists remain concerned about the potential for stagflation, a scenario in which rising prices coincide with increasing unemployment. The recent rise in inflation to 2.9% in August raises questions regarding the lasting effects of the tariffs on consumer prices. A recent study estimates that tariffs may cost American households about $2,300 on average, leading to ongoing discussions about the long-term impacts of these economic changes.
Source: https://www.theguardian.com/business/2025/sep/17/us-federal-reserve-interest-rates-jerome-powell