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The Federal Reserve cut interest rates by a quarter-percentage point on Wednesday, reducing the benchmark rate to 4% to 4.25% in its first rate cut in nine months. The decision came amid mounting pressure from President Trump and concerns about a weakening job market that has seen employers hire an average of only 29,000 workers monthly over the three months ending in August.
The vote was 11-1, with the sole dissenter being Mr. Trump’s newly appointed economic adviser Stephen Miran, who advocated for a larger half-point cut. Mr. Trump had sworn in Miran to the Fed’s board of governors just before the two-day meeting began Tuesday. The president’s two other appointees, Michelle Bowman and Christopher Waller, supported the quarter-point reduction.
Federal Reserve Chairman Jerome Powell described the labor market as “unusual,” noting that while fewer employers are hiring, the workforce has also shrunk due to the president’s immigration crackdown. Revised employment data revealed the economy actually lost jobs in June for the first time since December 2020, and job creation this year has been the slowest since 2010 when America had 17 million fewer workers.
The rate cut reflects the Fed’s shift from concerns about inflation from Mr. Trump’s tariffs to worries about employment. While tariffs have increased the overall cost of living by 2.9% in August, the most significant increase in seven months, they haven’t triggered the severe inflationary pressures some economists predicted.
Stock markets showed mixed reactions, with the Dow Jones closing up 260 points or 0.5%, while the S&P 500 dropped 0.1% and the Nasdaq fell 0.3%. The Fed signaled potential for two more rate cuts before year-end and possibly into 2026, though panel members were divided on the extent of future cuts.
Politicians immediately politicized the decision. Republican Jason Smith praised the Fed for “finally” lowering rates, blaming delays for harming working families and citing revised job data showing 911,000 fewer jobs created during Biden’s presidency than originally reported. Democrat Brendan Boyle warned of potential stagflation, arguing the cut proves President Trump’s economy isn’t performing well.
The president has taken unprecedented steps to influence Fed policy, including attempting to fire Fed Governor Lisa Cook over mortgage fraud accusations. The rate cut likely disappoints Mr. Trump, who has demanded “very big cuts” and repeatedly insulted Mr. Powell with terms like “moron” and “numbskull.” If Mr. Trump replaces Ms. Cook, his appointees would hold a 5-2 majority on the seven-member board, potentially compromising the central bank’s independence from political pressure.
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