Federal Reserve Cuts Fed Funds Rate by 25 Basis Points to A 4.00% - 4.25% Target

As expected, the Federal Reserve cut interest rates by 25 basis points to a 4.00% to 4.25% target.   This move marks the Fed's first cut since December 18, 2024.

Recent measurements show that inflation has moved up recently and remains far from the Fed's 2% target.  There continues to be a strong risk that inflation will lead to still higher inflation.  The Fed's statement nonetheless suggests that the balance of risks has changed and that weakening employment numbers show that the economy requires a dovish move.

Steven Miran, who Trump recently appointed to the Federal Reserve, dissented on favor of a 50 basis point cut.  Fed governors Bowman and Waller, who had dissented in favor of cutting by 25 basis points, did not dissent at this meeting. 

While seven participants see no more cuts this year and one wants an additional 25 basis points of easing, ten see two more cuts.  Miran and the White House supports at least another 125 basis points of weakening.

Lower rates are are obviously cheered by those parts of the economy dependent on low costs of credit.  It nonetheless seems very unfortunate that the Fed has strayed already from its goal of maintaining price stability, and is so quick to discount inflation metrics that show the risks are not abating.