Fed cuts rates after holding off for months amid tariff turmoil

By Brett Rowland
The Center Square

The Federal Reserve announced a quarter-percentage-point rate cut on Wednesday, after taking a wait-and-see approach to President Donald Trump's sweeping tariffs.

Wednesday's rate cut was the Fed's first since late 2024. The move lowers the benchmark interest rate to 4% to 4.25%. Officials signaled the possibility of two more rate cuts this year.

"Recent indicators suggest that growth of economic activity moderated in the first half of the year," according to the Federal Open Market Committee. "Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated."

The FOMC said the decision was in "light of the shift in the balance of risks."

Trump's newest appointee to the FOMC, Stephen Miran, was the only member to oppose the move. He wanted a half percentage point cut.

Lisa Cook, the Biden appointee who Trump tried to fire, voted with the rest on the rate cut.

Trump wants even lower rates and has aggressively pushed the independent central bank to lower rates. 

Trump has said the U.S. should have the lowest rates in the world.

Not everyone agrees with the FOMC decision.

Cato Institute Research Fellow Jai Kedia said rates should have stayed flat or ticked up.

"The Fed cut its target for the federal funds rate by 25 basis points with near unanimous consent. The weakening labor market ultimately convinced the FOMC to cut the rate but this decision is not a clear positive with recent data showing inflation well above the Fed's 2% target," Kedia said. "In fact, monetary policy rules would advocate keeping rates steady or even a minor increase. This increased uncertainty is likely the result of negative supply factors that make the Fed's job much harder."