US Fed lowers rates with 25 BPS, first change in 2025 opens the door to relaxation cycle

This year, the American Federal Reserve has lowered the interest rates for the first time, which reduces the benchmark policy percentage by 25 basic points to 4% -4.25% reach. The movement marks the start of a monetary relaxation cycle aimed at supporting a delaying labor market, even if inflation remains increased.

Fed said for further adjustments to interest rates, the committee will assess incoming data, evolve outlook and the risks of balance.

The central bank acknowledged that the growth of economic activity was moderated in the first half of the year and that work wins were delayed. Even when it had a reduction, Fed pointed to increased inflation.

The latest data from the consumer price showed inflation in August that reached a highest point in seven months, with food and clothing costs that cause much of the increase. Nevertheless, policymakers chose to give priority to the labor market, which has shown signs of weakness.

Recent figures revealed smaller job profits and an increase in unemployment, whereby many companies postpone recruitment in the midst of an uncertain economic prospect.

Together with the policy result, FED increased its growth ear spelling from 2025 to 1.6% compared to the 1.4% projection of June. However, it has not made any change in its unemployment and inflation fortress. The Fed action breaks a break that started in January after a series of cutbacks between September and December last year. Analysts say that the final step can offer a new momentum for Wall Street, although some of the optimism may already have been priced. Market participants are now expecting a series of interest rates until the rest of the year and in 2026. Some predictions indicate no fewer than six basic points by the end of next year, although much of the path of inflation and the representation of the wider economy.

The decision also comes across the background of political pressure. US President Donald Trump has been vocal in the insistence of chairman Jerome Powell to reduce the rates more aggressively and to accuse the Fed of withholding growth. Divisions within the policy committee of the Central Bank had also delayed a pivot, but today’s relocation indicates a clear attitude of postures.

After the decision, on Wall Street, Dow Jones jumped with 0.78%, even when Tech Heavy Nasdaq was in red.