By Anirudha Yerunkar

Copyright india

The US Federal Reserve has delivered its first rate cut of the year reducing the benchmark policy rate by 25 basis points to a range of 4%–4.25%. The Federal Reserve cut its benchmark interest rate by a quarter percentage point bringing it down to about 4.1% from 4.3% and signaled two more reductions later this year amid rising concerns over the weakening U.S. labor market.
This marks the Fed’s first rate cut since December. Policymakers led by Chair Jerome Powell had held rates steady through the year while assessing the impact of tariffs stricter immigration measures and other Trump administration policies on inflation and growth.
However with inflation still slightly above the 2% target and job creation slowing sharply in recent months the Fed has shifted its priority toward supporting employment. The rate cut is expected to ease borrowing costs for mortgages auto loans and business credit potentially spurring economic activity and job growth.
Jerome Powell On US Fed Reserve Rate Cut
“In this less dynamic and somewhat softer labour market the downside risks to employment appear to have risen” Powell said at a press conference following the Feds two-day meeting.
Fed officials also signalled that they expect to reduce their key rate twice more this year but just once in 2026 which may disappoint Wall Street. Before the meeting investors had projected five cuts for the rest of this year and next.
Challenges In Front Of US Fed Reserve
The Fed is facing both a challenging economic environment and threats to its traditional independence from day-to-day politics. At the same time that hiring has weakened inflation remains stubbornly elevated. It rose 2.9% in August from a year ago according to the consumer price index up from 2.7% in July and noticeably above the Feds 2% target.
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Its unusual to have weaker hiring and elevated inflation because typically a slowing economy causes consumers to pull back on spending cooling price hikes. Powell suggested last month that sluggish growth could keep inflation in check even if tariffs lift prices further.
Separately Trumps attempted firing of Cook is the first time a president has tried to remove a Fed governor in the central banks 112-year history and has been seen by many legal scholars as an unprecedented attack on the Feds independence.
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FED Chair Jerome Powell on rate cut
His administration has accused Cook of mortgage fraud but the accusation has come in the context of Trumps extensive criticism of Powell and the Fed for not cutting rates much faster and steeper.
Last week the European Central Bank left its benchmark rate unchanged as inflation has largely cooled and the economy has seen limited damage so far from US tariffs.
On Friday the Bank of England is also expected to keep its rate on hold as inflation at 3.8% remains higher than in the United States.
(With Input From Agencies)