Update 894 – Fed Cuts Rates 25 BPs;
Only Dissent: Trump-Nominated Miran
The Federal Reserve cut interest rates by 25 basis points, as expected, at the conclusion of its September FOMC meeting this afternoon. Fed Governor Stephen Miran, who has not resigned from his position at the White House, dissented, voting instead for a 50 basis point cut. For the second consecutive FOMC meeting, a Trump-appointed committee member has dissented, voting in favor of lowering rates more than the preference of the majority.
FOMC participants also projected that the committee would cut rates by a further 50 basis points by the end of the year, cutting rates by more than FOMC participants had projected in June. The contentious interest rate decision comes amid President Trump’s increasingly aggressive campaign to pressure the FOMC to lower rates, and as inflation has begun rising due to the administration’s sweeping tariff policy. We cover the decision in detail below.
Best,
Dana
Fed Cuts Rates, Projects 50 BP Cuts by End of 2025
The Federal Reserve announced this afternoon that it is cutting interest rates by 25 basis points from the high level at which it has held rates since December of last year. Today’s broadly anticipated decision came at the conclusion of the Federal Open Market Committee’s (FOMC) September meeting.
Trump-appointed Fed Governor Stephen Miran – who Republicans rushed to confirm hours before the FOMC meeting began – dissented, supporting a 50 basis-point cut instead of a 25 basis-point cut. Miran has not resigned from his position at the White House, where he directly serves President Trump, who has pressured the Fed to dramatically lower interest rates.
Today’s was the second consecutive meeting in which an FOMC member has dissented. At the FOMC’s last meeting in July, two Trump-appointed Fed governors – Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman – dissented, supporting a 25 basis-point cut instead of a pause. Such dissents are rare.
According to economic projections released following the meeting, the FOMC participants forecast that if the economy continues to evolve as expected, they will opt to cut rates to 3.6 percent by the end of this year. This suggests that FOMC members will cut rates by 25 basis points following each of their remaining meetings this year in October and December.
Economic projections are collected from each of the nineteen FOMC participants – the seven members of the Fed’s Board of Governors and five presidents of regional Reserve banks who vote on the path forward for interest rates, and the seven non-voting Reserve Bank presidents – at every other FOMC meeting. The projections reflect participants’ expectations of future economic outcomes and appropriate monetary policy, given their assessments of current economic data. FOMC participants also project that they would cut rates to 3.4 percent by the end of 2026 and to 3.1 percent by the end of 2027.
One FOMC participant projected that it would be appropriate to lower interest rates to the 2.75 to 3.0 percent range by the end of this year, an adjustment that would require cutting rates by a further 125 basis points. Projections are anonymous, but it is very likely that Fed Governor Miran is responsible for this projection.
FOMC Participants’ Assessments of Appropriate Monetary Policy: Midpoint of Target Range or Target Level for the Federal Funds Rate (September 17, 2025)
Source: Federal Reserve, Summary of Economic Projections, September 17, 2025
FOMC participants now project that the committee will lower interest rates by a total of 75 basis points this year, including today’s 25 basis-point cut. In the FOMC’s last set of projections, issued in June, members had penciled in cutting rates by a total of 50 basis points by the end of this year. Recent data showing the labor market to be softer than previously thought and weakening has led members to rebalance the Fed’s dual mandate of price stability and maximum employment, even as inflation rises under the weight of the Trump administration’s tariffs. In his press conference following the FOMC’s meeting today, Federal Reserve Chair Jerome Powell said the Fed is seeking to balance these competing economic risks.
Rate Cut as Inflation Rises and Labor Market Softens
The FOMC began raising the federal funds rate from near zero in early 2022 in an effort to combat rising inflation. The committee raised rates to the 5.25 to 5.5 percent range in its most aggressive series of rate hikes since the 1980s and opted to hold rates steady at this elevated level until late last year, when it lowered rates to the 4.25 to 4.5 percent range. This afternoon’s 25 basis point cut brings the federal funds rate to the 4.0 to 4.25 percent range.
When the committee last cut rates in December, the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, had fallen from its peak of 7.1 percent in mid-2022 to 2.5 percent. At the time, FOMC members projected inflation would fall further over the coming year and reach the Fed’s two percent target in the longer run.
As the Trump administration implemented sweeping tariffs on goods imported from America’s trading partners across the globe, inflation instead ticked up over the past several months, rising from 2.2 percent in April to 2.6 percent in July. The median FOMC member now projects PCE inflation will rise to 3.0 percent by the end of this year, then fall to 2.6 percent by the end of next year.
In December, the labor market was also seen as resilient, with monthly job gains strong and the unemployment rate near a historic low. Since then, job gains over the period from March 2024 to March 2025 were revised down by 911,000 jobs, revealing that the labor market was significantly softer in 2024 and early 2025 than previously thought. Monthly job gains in 2024 averaged 106,000 per month, down from the previously estimated 168,000 per month, while monthly job gains in 2025 averaged 44,000 per month, down from the previously estimated 75,000 per month. Job gains slowed notably over the past three months, with an average of 38,000 jobs being added to the economy in June, July, and August.
Unemployment remains low but ticked up to 4.3 percent last month, its highest level since October 2021. The median FOMC member now projects the unemployment rate will rise to 4.5 percent by the end of this year, then tick slightly down to 4.4 percent by the end of next year.
Decision as Trump Threatens Fed Independence
The FOMC’s interest rate decision comes amid President Trump’s ongoing effort to undermine the Fed’s independence as he pressures committee members to lower interest rates. President Trump has been seeking to secure a majority on the Fed’s Board of Governors to gain influence over traditionally politically insulated monetary policy decisions.
Republicans rushed to confirm Stephen Miran, Chair of the White House Council of Economic Advisors, to fill an unexpired term on the board ahead of the meeting. Miran was confirmed by the Senate on Monday night in a 48-47 vote, with Senator Lisa Murkowski (R-AL) joining Democrats in opposing Miran’s confirmation. Miran has said he will not resign from his position at the White House, where he directly serves the president as an advisor on economic policy, but will instead take an unpaid leave of absence, allowing him to return to the White House after his term as Fed governor ends in January. As Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) noted during Miran’s confirmation hearing, President Trump “wants to install his lackey so that we will have a Fed that uses its power to please the president, but that can’t be trusted to keep inflation under control.”
Senator Murkowski raised concerns about preserving Fed independence in discussing her vote, reportedly saying, “The one thing that everyone is in agreement [on] when it comes to the Fed is that we want it — need it — to be that independent board. Anything that would compromise even the perception of independence, I was looking at very carefully.” Senator Thom Tillis (R-NC) admitted that he voted to confirm Miran despite his belief that he would not serve independently, reportedly saying, “I don’t think he’s going to be independent. I mean, he basically said that he’d go back and work for the president again. So he’s obviously going to be carrying the banner of the White House.” Miran was sworn in on Tuesday morning, shortly before the FOMC meeting began.
Trump has also attempted to remove Biden-appointed Governor Lisa Cook from her position on the board. On Monday night, the United States Court of Appeals for the District of Columbia Circuit rejected a request from the Trump administration to remove Cook ahead of this week’s FOMC meeting, saying her removal “likely violated the Fifth Amendment’s Due Process Clause.”
Earlier today, Ranking Member of the House Committee on Financial Services Maxine Waters (D-CA) and Committee Democrats hosted a roundtable conversation with former Fed Governor and Vice Chair, Dr. Lael Brainard, on President Trump’s effort to undermine Fed independence. As Dr. Brainard noted, “When Nixon wanted to juice the economy before the 1972 election and put enormous pressure on then-Chair Arthur Burns, they got a short-term reduction in unemployment and interest rates, but then inflation started to rise and really didn’t stop.” She explained that inflation rose “from 3 percent to 11 percent three years later, then climbed to above 13 percent by the end of the decade,” while, “Unemployment went up from 5 percent to nearly 10 percent in 1975 and then further in 1982.”
Fed Faces Monetary Policy Challenge Ahead
With inflation rising and the labor market weakening, the Trump administration’s policy agenda unfolding and remaining subject to change, and the president seeking to undermine the institution’s longstanding independence, the Fed faces the challenge of deciding monetary policy within a tumultuous economic and political environment.
The Fed’s dual mandate goals are in tension. Fed Chair Powell and politically independent FOMC members must continue to hold their ground and maintain their independence, rather than give in to pressure from President Trump and his senior administration members to lower rates quickly. It is critical that members of Congress on both sides of the aisle defend the independence of the FOMC, particularly given that monetary policy can be a key tool in protecting the economy during periods of stress. The FOMC meets next to determine the fate of interest rates on October 28 and 29.