In a significant move to address growing labor market vulnerabilities, the Federal Reserve announced a quarter-percentage-point reduction in its benchmark interest rate on September 17, 2025. This marks the first rate cut since December and signals potential further reductions in the coming months. The decision, which lowers the rate to a range of 4.00%-4.25%, reflects heightened concerns over rising unemployment, particularly among minority groups and younger workers, as well as a declining average workweek and sluggish payroll growth. Fed Chair Jerome Powell emphasized that the softening job market has become a top priority for policymakers, stating, ‘We don’t need it to soften anymore.’ The Fed’s projections indicate two additional rate cuts before the end of the year, though the decision fell short of the more aggressive half-percentage-point cut advocated by newly appointed Fed Governor Stephen Miran, who cast the sole dissenting vote. Miran’s year-end rate projection suggests he supports further significant reductions, potentially bringing the policy rate below 3%. The decision comes amid political tensions, with President Donald Trump’s attempts to influence the Fed through criticism and personnel changes, including an unsuccessful effort to remove Governor Lisa Cook. Despite these pressures, the Fed maintained its independence, with Powell asserting that decisions are driven by data rather than external influences. While inflation remains above the Fed’s 2% target, policymakers prioritized employment risks, reflecting a shift in focus from price stability to labor market health. The announcement briefly buoyed stock markets, though they later closed mixed, while the dollar strengthened modestly. Treasury yields remained stable, and rate futures markets indicated a high probability of another cut at the Fed’s October meeting.