Fed Cuts Interest Rates 0.25%, Signals Two More Cuts Coming in 2025

TLDR

Table of Contents

The Federal Reserve cut interest rates by 0.25% to a range of 4.00%-4.25% in an 11-to-1 vote
Two more rate cuts are expected before the end of 2025, according to the Fed’s “dot plot” projections
Nvidia announced a $5 billion investment in Intel, causing Intel’s stock to surge nearly 30% in premarket trading
Stock market futures jumped Thursday morning, with the Nasdaq leading gains at 1.2%
Fed Chair Jerome Powell cited concerns about the slowing labor market and elevated inflation as key factors

The Federal Reserve delivered a widely expected quarter-point interest rate cut Wednesday, lowering the benchmark rate to a range between 4.00% and 4.25%. The decision came as policymakers expressed growing concerns about the U.S. labor market despite ongoing inflation pressures.

It's official:
For the first time in 2025, the Fed just cut interest rates by 25 basis points and "blamed" a weaker labor market.
Immediately after, the US Dollar fell to its weakest level since February 2022.
What's coming next? Let us explain.
(a thread) pic.twitter.com/OXeKuJYRfW
— The Kobeissi Letter (@KobeissiLetter) September 17, 2025

The Federal Open Market Committee approved the reduction in an 11-to-1 vote, with newly installed Governor Stephen Miran as the sole dissenter. Miran advocated for a larger half-point cut instead of the quarter-point reduction.

Fed Chair Jerome Powell characterized the move as “risk management” rather than a response to economic weakness. The central bank’s statement noted that “job gains have slowed” and inflation “has moved up and remains somewhat elevated.”

The Fed’s closely watched “dot plot” of individual rate projections indicated two more cuts are likely before the end of 2025. Nine of 19 participants saw just one more reduction this year, while 10 expected two cuts, likely at the October and December meetings.

Stock market futures jumped Thursday morning following the Fed’s decision and additional corporate news. Dow Jones futures rose 0.7%, while S&P 500 futures gained 0.8%. Nasdaq 100 futures led the advance with a 1.2% increase.

The market rally received additional support from Nvidia’s announcement of a $5 billion investment in struggling chipmaker Intel. Intel shares surged almost 30% in premarket trading as investors welcomed the partnership, though the deal stopped short of providing Intel with a crucial manufacturing contract.

Market Response to Fed Policy

Markets initially showed hesitation after Powell’s comments that high inflation and weak labor market conditions leave “no risk-free path” for monetary policy. However, the prospect of additional rate cuts helped boost investor sentiment Thursday.

The S&P 500 is positioned to cross 6,700 at the open if premarket gains hold, after closing above 6,600 for the first time earlier this week. All three major U.S. indexes have posted gains in September, defying the month’s historically poor performance for stocks.

The unemployment rate reached 4.3% in August, marking the highest level since October 2021. Recent data from the Bureau of Labor Statistics revealed the economy created nearly one million fewer jobs than initially reported in the 12-month period prior to March 2025.

Corporate Developments and Economic Outlook

Powell noted that monetary policy is now in a “more neutral” position compared to previous characterizations of being moderately restrictive. The Fed’s projections showed slightly faster economic growth than forecast in June, while unemployment and inflation outlooks remained unchanged.

Political dynamics have added complexity to Fed decisions, with President Trump advocating for more aggressive rate cuts throughout the summer. Trump has argued that lower rates are needed to support the housing market and reduce government financing costs.

The central bank indicated one additional cut in 2026, moving more slowly than current market pricing suggests. Officials also projected another reduction in 2027 as the Fed approaches its long-run neutral rate target of 3%.

FedEx is scheduled to report quarterly results after Thursday’s market close. Analysts expect the delivery company’s profits to face pressure from Trump’s decision to end tariff exemptions for low-value packages from China and Hong Kong.

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