The Fed Rate Cut September 2025 Story Ends Amid High Inflation

FOMC Meeting on Fed Rate Cut Sept 2025: Powell Leads, Miran Dissents

In the breaking announcement, the FOMC meeting has officially announced a Fed Rate Cut by 25 basis points, bringing the funds target range to 4.0%–4.25%. The decision, announced on September 17, 2025, reflects the Federal Reserve's effort to balance a cooling job market with persistent inflation pressures. 

Although the move was not a surprise, it has a historic value since the first occasion in over 30 years that the Federal has relaxed the policy has taken place when inflation remains near 3%.

FOMC Meeting: The Fed Rate Cut Decision 

The Federal Open Market Committee (FOMC) voted overwhelmingly to lower rates with only one dissent. Chair Jerome Powell and most officials backed a quarter-point cut, although recently appointed Governor Stephen Miran backed a larger 50 basis point cut. The Fed, in its statement, said that the decision was arrived at considering the change in the balance of risks, where there were increasing fears about slowing employment rather than inflationary fears.

Source: Official Federal Reserve Website

How Decision has Been Made?

The press release pointed out the poor economic indicators:

• The growth rate of GDP decelerated to 1.5% in the first half of 2025.

• Job gains have slowed, and unemployment is rising slowly but is still relatively low.

• Inflation has risen to 2.9% from the Fed's target rate of 2%.

Alongside, the projections in the form of a dot plot show a board that is divided into two halves. Out of 19 Fed members:

• 9 see two more cuts in 2025, making 50 bps.

• 6 see no further cuts.

• 1 expects a hike, while another is projecting as much as 125 bps of cuts by January 2026.

This acute split highlights one of the most divided boards of the Fed in recent years.

Source: Wu Blockchain X

Reasons for the Rate Cut Decision

The Fed has a twofold mandate: maximum employment and price stability.  Jerome Powell on Fed rate cut stressed that the employment risks have increased, and although inflation remains hot, the weakness in the labor market could be a bigger threat. Research, including a 2024 NBER study, has shown that tariffs can add 1–2% to consumer prices, complicating inflation control.

Stephen Miran's dissenting voice, demanding a deeper cut, is a sign of political influence, as he was appointed by former President Trump after the sudden resignation of Governor Kugler. His push implies a greater commitment to the pro-growth agenda of Trump, which brings up the issue of Fed independence.

Impact of FOMC Meeting Decision

The decision represents a major policy change. The Fed is now cutting into inflation, which is rarely seen historically, as it is associated with the risks of stagflation. 

PCE inflation of 2.6% in 2026 and a range of 4.3-4.5% for unemployment are the official forecasts. This is a hint that there could be a period when both inflation and joblessness can be uncomfortably high.

Market Reaction: swiftly

• The U.S. dollar fell to its weakest level since February 2022.

• Crypto markets saw over $105 million in liquidations.

• The S&P 500, already at record highs, is now expected to benefit. 

Historically, when interest rates are cut with stocks near peak levels, the index has risen an average of 13–14% over the following year.

The housing market, however, remains sluggish. Demand is near its second-lowest level on record, comparable to 2009, and mortgage rates may need to fall further to unlock supply.

Source: The Kobeissi Letter X

Federal Reserve Historic Move

This is the first Fed rate cut in more than three decades with Core PCE inflation above 2.9%. It highlights how the Fed has prioritized the labor market over price stability, which is a considerable change in its tendency to tighten in periods when inflation is high.

Future Move of the Federal Reserve

The dot plot and Powell's comments indicate that more cuts are possible. Markets are now looking at as many as 6 more cuts by end of 2026 (2 by the end of 2025 and the other 4 may be by 2026). 

Nevertheless, the split outlook indicates the uncertainty of the future, and stagflation risks remain. Powell made clear that the Federal Reserve is still "focused on containing inflation and unemployment, not the stock market" despite bubble concerns.

Final Wrap-Up

The interest rate cut of September 2025 is controversial and historic. It is a sign of willingness to take jobs overinflation, even if it leads to creating asset bubbles. As the U.S. economy continues to deal with 1.5% GDP growth and an increase in unemployment, the future is unclear. 

The divided board of the Federal Reserve and the dissent of Miran further underscores the role of political and economic pressures in policymaking. To investors, the relocation would be an opportunity--but also an increase in volatility in stocks, bonds, housing, and crypto in the months to come.