Fed Slashes Interest Rates As Job Market Falters Amid Trump Pressure

The Federal Reserve lowered interest rates Wednesday for the first time this year, aiming to relieve stress on a slowing U.S. job market.

The Federal Open Market Committee (FOMC), which sets borrowing costs, reduced its benchmark interest rate to a range of 4 to 4.25 percent, trimming it by a quarter point.

Markets had largely predicted the move after months of bleak employment reports and unrelenting pressure from President Trump, who has pushed to shake up the Fed’s leadership.

Fed Chair Jerome Powell, the main focus of Trump’s campaign to influence the central bank, had been reluctant to cut rates while weighing the inflationary fallout from Trump’s tariffs. But the weakening labor market convinced policymakers to accept some risk in their fight against rising prices.

“Even if inflation remains high … Powell seemed to be willing to give that the benefit of the doubt and, instead, focus on the risk that any incipient weakness in the labor market might gain momentum and prove harder to arrest over time,” wrote economists at LHMeyer Monetary Policy Analytics, according to The Hill.

Joblessness has crept higher through 2025 as monthly hiring has slowed well below levels needed to sustain stability. Sharp downward revisions to earlier employment data showed the economy entering the year weaker than previously believed.

The Fed delayed easing rates while Trump’s tariffs disrupted global trade and drove prices up. Consumer prices in August were 2.9 percent higher than a year ago, still above the Fed’s 2 percent inflation target.

Inside the central bank, debate grew over whether the tariff-driven price surge had already passed.

Fed Governor Christopher Waller and Vice Chair of Supervision Michelle Bowman, both appointed by Trump, voted to reduce rates in July, breaking with colleagues. Their move marked the first time in more than three decades that two Fed board members opposed the majority.

Trump and senior aides have spent months criticizing Powell and his team for resisting lower borrowing costs.

The president has often charged Powell, a Republican originally chosen by Trump to lead the Fed, with undermining his trade policies. He has also argued the central bank should help cut the government’s debt expenses by lowering rates, worrying budget experts and Fed historians.

Although Trump ultimately backed off from firing Powell, he has pushed to reshape the Fed through other contentious tactics.

The administration is seeking to oust Fed Governor Lisa Cook, accusing her of mortgage fraud in a case tied to filings with the Federal Housing Finance Agency. The dispute hinges on whether those allegations, which have produced no federal charges, can override protections in the Federal Reserve Act for board members.

Meanwhile, Trump succeeded in placing Stephen Miran, a former White House economist, on the Fed’s board as the FOMC meeting opened Tuesday.

The Fed’s decision may look like a win for Trump, but its real significance lies in its warning about economic weakness.

While a quarter-point shift is standard for Fed policy moves, it falls short of the aggressive cuts Trump demanded, accusing the bank of choking growth with high rates.

Fresh Fed forecasts released Wednesday show officials expect slower economic growth and rising unemployment compared to earlier in the year.