Summary
The US Federal Reserve cut interest rates by a quarter point today, a move that will reverberate across the economy in the coming months. Fed chair Jerome Powell spoke at a closely watched press conference about the Fed’s decision.
Here’s a summary of what happened this afternoon:
The Fed cut interest rates by a quarter point, the first cut since December 2024. Rates are now at a range of 4% to 4.25%.
Fed economists also released projections, which point to a majority expecting at least one more rate cut by the end of the year.
During his press conference, Powell said the rate cut was a move toward “risk management” instead of a testament to the strength of the economy. Economists at the Fed are concerned about a weakening labor market, which could see higher layoffs if worsened.
But Fed officials are still concerned about inflation. Powell said that prices are likely to continue going up toward the end of the year as companies pass along the price of tariffs to consumers.
A question remains: Will tariff-related inflation be a one-time price increase, or will it be persistent? Powell said economists at the Fed expect it to be more of a one-time price increase but that the Fed’s just is to make sure it’s not persistent.
With pressure from the labor market and prices, Powell described it as an “unusual” situation for the Fed to manage. “Our tools can’t do two things at once,” he said.
Powell also took questions about the recent appointment of Fed governor Stephen Miran, who was confirmed by the Senate on Monday. Powell assured that the Fed’s independence is a priority to the entire committee that sets interest rates. And the Fed’s structure offers protection: For a single member to have outsized influence, they need to “make really strong arguments based on the data and one’s understanding of the economy… That’s in the DNA of the institution.”
Updated
Powell responded to a question about comments new Fed governor Stephen Miran made at his confirmation hearing in front of the Senate earlier this week.
Miran said that the Fed actually has a “third mandate”, which is to “moderate long-term interest rates”.
The introduction of a third mandate is in opposition to how Powell has framed the Fed’s “dual mandate” – balancing unemployment and price increases.
“We always think of it as the dual mandate,” Powell said, explaining that moderate interest rates come from stable inflation.
“As far as I’m concerned, there’s no thought of … incorporating that in a different way,” he said.
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