0
Federal Reserve Chair Jerome Powell speaks at Fed headquarters in Washington, D.C., on September 17 after the FOMC decided to cut rates by 0.25 percentage points to 4.00–4.25%. / Source: AP-Yonhap

The U.S. Federal Reserve lowered its benchmark interest rate by 0.25 percentage points on September 17, marking its first cut in nine months and the first under the Trump administration. The move shifts the federal funds rate to a range of 4.00–4.25% from 4.25–4.50%.

The decision, backed by 11 of 12 voting members of the Federal Open Market Committee (FOMC), came after five consecutive holds since December’s quarter-point reduction. The sole dissent was from newly appointed Fed Governor Stephen Myron, who voted for a larger 0.50-point cut.

With the change, the rate gap between the U.S. and South Korea (2.50%) narrowed to 1.75 percentage points at the upper end.

In its statement, the Fed cited slowing growth and weakening job gains despite inflation remaining elevated. “Economic activity expanded at a slower pace in the first half of the year. Job gains have moderated and the unemployment rate has edged up, though it remains low. Inflation has risen and is still running at an elevated level,” it said.

Fed Chair Jerome Powell stressed that labor market risks were the key factor. “The balance of risks has shifted as downside risks to employment have increased,” Powell said in a press conference. “The focus of today’s decision is on the risks we are seeing in the labor market.”

Powell noted that job supply has stagnated while demand is falling sharply, leading to what he described as a “curious balance.” He also pointed to Trump administration tariffs as an ongoing risk to inflation, saying higher goods prices accounted for much of this year’s increase.

The Fed projected a median year-end rate of 3.6%, signaling two more cuts by December. Nine of 19 policymakers anticipated one more cut this year, while 10 expected two. Another cut was penciled in for 2026, suggesting a slower pace of easing than markets currently expect.